Momentum Due Diligence

Sometimes I get asked how well momentum has done the past year. If I am in a snarky mood that day, I’ll respond, “What will that tell you?” The truth of the matter is that, in most cases, short-term performance is indistinguishable from noise. Here are the questions that one should ask instead: 1)  Why…

Momentum and Stop Losses

Stop losses are a form of trend following in which you switch from risky assets, such as stocks, to a risk-free or fixed income asset after there are pre-determined cumulative losses. The random walk hypothesis (RWH) was widely accepted in the 1960s and 1970s. It was synonymous with market efficiency. It effectively eliminated any academic…