Sticking With Winners Is What Won in 2017’s Stock Market https://www.bloomberg.com/news/articles/2017-12-29/momentum-stocks-stole-show-in-2017-with-whiff-of-dot-com-mania
There are two types of momentum: stale and fresh momentum.
Momentum in academia is defined as assets that rose or fell in the last 12 months. There is plenty of research that they tend to continue in the same direction in the subsequent 12 months. E.g. stocks that rose in the last 12 months tend to continue to rise in the next 12.
However, one must differentiate between fresh and stale.
Stale momentum is assets that prior to the 12 months, was rising in the last 12 months. That means from t-24 to r-13 assets were already rising.
Fresh momentum means prior to last 12 months, they were falling for previous 12 months. That means t-24 to t-13 they fell, t-12 to t-1 they rose.
Stale momentum assets tend to run out of steam after 4 months, if you count from March 2016 which was the start of the momentum, March 2017 to March 2018 is considered fresh momentum. But from March 2018 onwards, the odds of momentum continuing is poor after 4 months. Hence July 2018, we could see momentum failing. Hence it reinforces my view that we have entered a dangerous period in 2018 and we should see a major correction at least in the second half of 2018.
Stay tuned. Meanwhile, ride the trend.
There are two types of momentum: stale and fresh momentum.
Momentum in academia is defined as assets that rose or fell in the last 12 months. There is plenty of research that they tend to continue in the same direction in the subsequent 12 months. E.g. stocks that rose in the last 12 months tend to continue to rise in the next 12.
However, one must differentiate between fresh and stale.
Stale momentum is assets that prior to the 12 months, was rising in the last 12 months. That means from t-24 to r-13 assets were already rising.
Fresh momentum means prior to last 12 months, they were falling for previous 12 months. That means t-24 to t-13 they fell, t-12 to t-1 they rose.
Stale momentum assets tend to run out of steam after 4 months, if you count from March 2016 which was the start of the momentum, March 2017 to March 2018 is considered fresh momentum. But from March 2018 onwards, the odds of momentum continuing is poor after 4 months. Hence July 2018, we could see momentum failing. Hence it reinforces my view that we have entered a dangerous period in 2018 and we should see a major correction at least in the second half of 2018.
Stay tuned. Meanwhile, ride the trend.
