Finance

Business

Stock (firearms)

Earnings

Financial economics

Engineering

Profitability index

Economics

Portfolio

Monetary economics

Market efficiency

Mechanical engineering

The Journal of Finance

ABSTRACT This paper documents that strategies which buy stocks that have performed well in the past and sell stocks that have performed poorly in the past generate significant positive returns over 3‐to 12‐month holding periods. We find that the profitability of these strategies are not due to their systematic risk or to delayed stock price reactions to common factors. However, part of the abnormal returns generated in the first year after portfolio formation dissipates in the following two years. A similar pattern of returns around the earnings announcements of past winners and losers is also documented.

Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency