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Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency

Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency ABSTRACT This paper documents that strategies which buy stocks that have performed well in the past and sell stocks that have performed poorly in the past generate significant positive returns over 3‐ to 12‐month holding periods. We find that the profitability of these strategies are not due to their systematic risk or to delayed stock price reactions to common factors. However, part of the abnormal returns generated in the first year after portfolio formation dissipates in the following two years. A similar pattern of returns around the earnings announcements of past winners and losers is also documented. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency

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References (38)

Publisher
Wiley
Copyright
1993 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1993.tb04702.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT This paper documents that strategies which buy stocks that have performed well in the past and sell stocks that have performed poorly in the past generate significant positive returns over 3‐ to 12‐month holding periods. We find that the profitability of these strategies are not due to their systematic risk or to delayed stock price reactions to common factors. However, part of the abnormal returns generated in the first year after portfolio formation dissipates in the following two years. A similar pattern of returns around the earnings announcements of past winners and losers is also documented.

Journal

The Journal of FinanceWiley

Published: Mar 1, 1993

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