Investing Research Articles

Are there different patterns of short-term stock return reversal based on stock liquidity (measured by size, volatility or turnover)? In their January 2023 paper entitled “Reversals and the Returns to Liquidity Provision”, Wei Dai, Mamdouh Medhat, Robert Novy-Marx and Savina Rizova examine interactions between short-term reversal returns and stock liquidity metrics. They select reversal candidates… Keep Reading

Various studies find that returns on individual stocks exhibit tendencies for short-term (one month) reversal, medium-term (3-12 months) momentum and long-term (2-5 years) reversal. The short-term reversal is the basis for the skip-month included in some medium-term momentum strategies. Is there a way to concentrate the short-term reversal? In the March 2010 update of their… Keep Reading

Does short-term (one-month) stock return reversal persist? If so, is there a best way to refine and exploit it? In their March 2012 paper entitled “Short-Term Return Reversal: the Long and the Short of It”, Zhi Da, Qianqiu Liu and Ernst Schaumburg decompose the total short-term reversal into an across-industry component (long prior-month loser industries… Keep Reading

Are there ways to revive the fading performance of the short-term reversal (STR) strategy, which is long stocks with the lowest returns last month and short stocks with the highest? In their September 2023 paper entitled “Reversing the Trend of Short-Term Reversal”, David Blitz, Bart van der Grient and Iman Honarvar investigate revival of the… Keep Reading

Can investors effectively exploit the short-term price reversal anomaly for individual stocks after trading friction? Is success limited to big players? In their May 2010 paper entitled “Another Look at Trading Costs and Short-Term Reversal Profits”, Wilma de Groot, Joop Huij and Weili Zhou investigate the net profitability of reversal trading with and without steps… Keep Reading

“Compendium of Live ETF Factor/Niche Premium Capture Tests” summarizes results for its eponymous title. Here we add a live test of the short-term reversal effect among U.S. stocks. Specifically, we examine the performance of Vesper U.S. Large Cap Short-Term Reversal Strategy ETF (UTRN), designed to track the performance of a portfolio of 25 of the… Keep Reading

Are return reversals especially strong for lottery stocks? In their October 2023 paper entitled “Maxing Out Short-term Reversals in Weekly Stock Returns”, Chen Chen, Andrew Cohen, Qiqi Liang and Licheng Sun investigate return reversals for lottery stocks, those with high recent maximum daily returns (MAX). Specifically, for their main calculations, they each week: For each… Keep Reading

Do informed (noise) traders drive short-term stock return momentum (reversal)? In their April 2018 paper entitled “Short-term Momentum”, Mamdouh Medhat and Maik Schmeling investigate interaction of short-term momentum/reversal and recent share turnover for U.S. and international stocks. They define share turnover as prior-month trading volume divided by number of shares outstanding. Specifically, they consider four portfolios: Conventional short-term reversal:… Keep Reading

Do stock return momentum and reversal strategies work better when focused on certain intraday intervals rather than close-to-close, according to whether trades are primarily exploiting information or supplying liquidity? In his April 2017 paper entitled “Reversal, Momentum and Intraday Returns”, Haoyu Xu examines intraday versions of momentum and reversal anomalies, with focus on the first two… Keep Reading

As described in “Monthly Stock Return Reversal Update”, evidence for a conventional monthly stock return reversal effect since 1990 is weak. Is there a way to enhance the effect? In their August 2011 paper entitled “Short-Term Residual Reversal”, David Blitz, Joop Huij, Simon Lansdorp and Marno Verbeek present a short-term reversal strategy based on deviations of individual… Keep Reading