Finance academics who linked momentum to the state of the market
Michael J. Cooper, Roberto C. Gutierrez Jr. & Allaudeen Hameed
Michael J. Cooper, Roberto C. Gutierrez Jr. and Allaudeen Hameed published 'Market States and Momentum' in the Journal of Finance (vol. 59, 2004, pp. 1345-1365). Gutierrez, who holds a PhD in finance from the University of North Carolina (1999), is an associate professor of finance at the University of Oregon's Lundquist College of Business.
What they argue
- Momentum profits depend on the state of the market: from 1929 to 1995 they averaged 0.93% a month after UP markets and -0.37% a month after DOWN markets.
- UP is defined by a positive lagged 36-month market return; overconfidence is higher after market gains, which feeds momentum that later reverses.
Sources
Summaries are Be The Puck's paraphrase of public material. Be The Puck has no affiliation with the people listed.
Books and papers
- Market States and Momentum, Journal of Finance 59: 1345-1365 (2004)
12-1 momentum only after up markets
Rule and full recordMomentum · month-end
Momentum has paid after the market has risen and failed after it has fallen. Hold a stock with positive 12-1 momentum only while SPY is up over the last 3 years.
Best risk-adjusted results against buy and hold: