![]() ![]() So, this strategy is quite tricky to implement, as detecting these trends is no child’s play. Momentum strategies have been known to be alpha-generative over a long period and across market stages. ( ACGL Quick Quote ACGL - Free Report) are worth betting on. ( AGYS Quick Quote AGYS - Free Report) and Arch Capital Group Ltd. ( EME Quick Quote EME - Free Report), Agilysys, Inc. In this context, stocks like EMCOR Group, Inc. It is based on that gap in time before the mean reversion occurs, i.e., before prices become rational again. To sum up, momentum investing is a way to profit from the general human tendency to extrapolate current trends into the future. These behavioral problems extend trends, thus opening up huge opportunities for momentum players. However, once things become clear, they have a habit of going with the flow and overreacting, causing dramatic price reactions. Momentum investing is one of the best strategies to avoid making such errors in judgment.įurthermore, investors initially tend to underreact to news, events or data releases. On the other hand, a few investors sell their winners way too early. And these emotional responses, or rather mistakes, make the momentum strategy work.įor example, some investors are anxious about booking losses and hence hold on to losing stocks for too long, hopeful of a rebound in prices. There are several behavioral biases that most investors exhibit in their decision-making. But before we delve deep into it, let us try to fathom why does the momentum strategy at all work? ![]() This approach primarily tends to follow the adage, “the trend is your friend.” At its core, momentum investing is “buying high and selling higher.” It is based on the idea that once a stock establishes a trend, it is more likely to continue in that direction because of the momentum that is already behind it. One of the most successful game plans to beat the blues is to bet on momentum stocks when value or growth investing fails to generate the desired profits. With looming uncertainty, investors often seek to employ time-tested winning strategies to fetch sustained profits. However, latent threats related to geopolitical conflicts and unstable oil prices remained concerns for the broader markets. The unemployment rate rose to 3.9%, the highest level since January 2022, with a significant decline in household employment. The figure marked a sharp decline from 297,000 in September. The equity market uptrend was further buoyed by a soft monthly jobs report that revealed non-farm payrolls improved by 150,000 in October compared with the consensus forecast for a rise of 170,000. This, in turn, forced the bond yields to slide, which have been hovering around 5% for some time – the highest since 2007. Investors widely expect the Fed to keep the rates unchanged in December as well, owing to solid economic growth. Over the past week, the broader equity markets witnessed the longest rally since November 2021 as the Federal Reserve maintained the interest rates steady in the range of 5.25% to 5.5%.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |