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| Author: | Lesmond, D. A. Schill, M. J. Zhou, C. |
| Title: | The illusory nature of momentum profits |
| Journal: | Journal of Financial Economics
2004 : FEB, VOL. 71:2, p. 349-380 |
| Index terms: | Trading Transaction costs |
| Freeterms: | Momentum |
| Language: | eng |
| Abstract: | This article re-examines the profitability of relative strength or momentum trading strategies (buying past strong performers and selling past weak performers). It is found that standard relative strength strategies require frequent trading in disproportinately high cost securities such that trading costs prevent profitable strategy execution. In the cross-section, it is found that those stocks that generate large momentum returns are precisely those stocks with high trading costs. |
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