PT  - JOURNAL ARTICLE
AU  - Zhaobo Zhu
AU  - Kenneth Yung
TI  - The Interaction of Short-Term Reversal and Momentum Strategies
AID  - 10.3905/jpm.2016.42.4.096
DP  - 2016 May 31
TA  - The Journal of Portfolio Management
PG  - 96--107
VI  - 42
IP  - 4
4099  - https://pm-research.com/content/42/4/96.short
4100  - https://pm-research.com/content/42/4/96.full
AB  - This article investigates the interaction between short-term reversal and momentum strategies. The authors find that the magnitude of price reversals of short-term winners and losers is significantly related to past medium-term performance. Both past medium-term winners and losers with the best short-term performance experience the strongest price continuation. Short-term reversal strategies perform best in the momentum-loser quintile, and momentum strategies perform best in the short-term-winner quintile. The authors’ results imply that investors could achieve higher momentum profits by also considering short-term performance and vice versa. The results also suggest that investors adhere to prior dominant beliefs in the face of new contradictory information. Short squeezes and fire sales (self-attribution bias) may explain the continued underperformance (outperformance) of momentum losers (winners) with good short-term performance.TOPICS: Quantitative methods, performance measurement