Scientific Proof that MM is a genius

[Zenprofit]

For all you high-brow thinkers, sink your brain matter into this scientific paper:

http://www.bauer.uh.edu/TGeorge/papers/gh4-paper.pdf

The 52-Week High and Momentum Investing
THOMAS J. GEORGE and CHUAN YANG HWANG
ABSTRACT

When coupled with a stock’s current price, a readily available piece of information—the 52-week high price explains a large portion of the profits from momentum investing. Nearness to the 52-week high dominates and improves upon the forecasting power of past returns (both individual and industry returns) for future returns. Future returns forecast using the 52-week high do not reverse in the long run.These results indicate that short-term momentum and long-term reversals are largely separate phenomena, which presents a challenge to current theory that models these aspects of security returns as integrated components of the market’s response to news.

[mrmarket]

For all you high-brow thinkers, sink your brain matter into this scientific paper:

http://www.bauer.uh.edu/TGeorge/papers/gh4-paper.pdf

The 52-Week High and Momentum Investing
THOMAS J. GEORGE and CHUAN YANG HWANG
ABSTRACT

When coupled with a stock’s current price, a readily available piece of information—the 52-week high price explains a large portion of the profits from momentum investing. Nearness to the 52-week high dominates and improves upon the forecasting power of past returns (both individual and industry returns) for future returns. Future returns forecast using the 52-week high do not reverse in the long run.These results indicate that short-term momentum and long-term reversals are largely separate phenomena, which presents a challenge to current theory that models these aspects of security returns as integrated components of the market’s response to news.

That was an interesting read on a mechanical strategy. When I was a grad student at Wharton, I wrote a similar thesis for Prof Don Keim...it was what really got me thinking that there really was an easy way to beat the market consistently.

By blending the mechanical investing with bread and butter fundamental thinking, you basically have the MM model.

Thanks Zen.