Question

During the financial crisis, every stock return is negative. In this case, _____

		The momentum strategy cannot deliver positive return because every stock return is negative
		Not feasible to trade on the buy-winner-and-sell-loser momentum strategy because there are no winner stocks to buy
		None of the above
		One may still trade on the momentum strategy and earn positive return by buying stocks with smaller negative returns and short selling stocks with large negative returns

Answer 1

ANSWER DOWN BELOW. FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

Positive Return can be generated by= Short selling the stock with higher negative return and buying stock with lower negative Return.

We gain a lot from short selling and lose small by buying (or going long), hence generating a positive Return.

Answer: One may still trade on the momentum strategy and earn positive return by buying stocks with smaller negative returns and short selling stocks with large negative returns.