A test of the Investor's Daily stock ranking system |
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Authors: | Dennis O. Olson John Nelson Craig Witt Charles Mossman |
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Affiliation: | Department of Economics and Finance, Sultan Qaboos University;Department of Economics, University of Louisville;Sugar Research, Ltd.;Faculty of Management, University of Manitoba |
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Abstract: | This paper examines the profitability of trading strategies derived from stock rankings published in Investor's Business Daily. The best system provides market-adjusted abnormal monthly returns of 1.81% from buying S&P 500 stocks, and a 3.18% abnormal return on an arbitrage portfolio. Stocks selected for trading have above average volatility, but a portion of abnormal return may be a reward for identifying stocks with short-run sustainable price momentum. Results seem indicative of market inefficiency, but the phenomena may be temporary since abnormal returns are lower during the second half of the data set. |
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Keywords: | market efficiency momentum investing trading rules stock rankings relative strength |
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