Question

1. Your co-worker found that most of the return to the “winner-minus-loser” momentum portfolio is due to the poor performance of the losers and not due to the good performance of the winner portfolio. She says that she prefers it that way to the other way around because it is easier for investors to exploit the strategy to make money that way. Do you agree or disagree? Briefly explain.

Answer 1

THE WINNER MINUS LOSER STRATEGY IS DOING FINE AS IT IS AND THERE IS NO NEED TO CHANGE ANYTHING IN MY OPINION

THE REASONS ARE AS FOLLOWS

1. ALL THE THINGS DEPENDS ON MARKETS WHICH CANNOT BE PREDICTED AND THUS IT IS NOT SURELY SAID THAT THE INVESTORS COULD EXPLOIT THE OPPORTUNITY

2 THE REASON THAT THE PERFORMANCE IS DUE TO THE LOSERS AND NOT WINNERS TO CHANGE THE STRATEGY IS ALSO NOT ACCEPTABLE BECAUSE IT DEPENDS ON THE MARKET MOVEMENTS AND NOT ANY OTHER MAJOR FORCES THERE HAS TO BE A SEGMENT THAT OUTPERFORMS OTHER EITHER THEY ARE BULLS OR BEARS AND THUS IN A BEARISH MARKET THE WINNERS WILL GENERATE GOOD RETURNS AND VICE VERSA