Weaknesses and Strengths International Momentums Strategies

INTERNATIONAL MOMENTUMS STRATEGIES
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International Momentums Strategies
Previous studies provide evidence on the connection between past and present performances concerning stock returns (Groot, 2012). However, it is unclear on the reason for the occurrence of the connection and the probable nature of the relationship. Studies indicate that there is no correlation between the return continuation and the fundamental factors that include risks (KOSOWSKI, 2013). The absence of return continuation in the foreign markets and ties to risks in cases where they exist brings about anomalous data which may, in turn, be unexplainable. Also, companies that possess poor performances for periods of up to five years have been seen to have higher returns as compared to those that showed excellent performance in the past (Menkhof, 2010). The US stocks database has enhanced the discovery of returns and continuation patterns, thereby informing decision making (Gerstein Fisher , 2016). The future oriented momentum strategies indicate low correlations with other existing future strategies contrary to the fact that they have relatively low returns, providing additional diversification returns (Hong, 2003). The paper analyses the journal article critically to ascertain its effectiveness in informing the audience about the stated topic.
Theoretical Relevance of the Journal
The theme of the journal article clearly connects to the content of the article. The process of purchasing stocks with higher paybacks defines momentum; with the process generating abnormal excessive profits considerably challenging the shattered market efficiency (Grinblatt, 2003). Past winners who are losers eventually become losers who are winners after investing in a periodic scheme, running between three to five years (Kristensen, 2016). Long term reversals have been found to be more consistent with the multiple factors return models, with their model failing to elaborate on the medium-term continuation of performance. However, the journal article shallowly explains on the theoretical aspect of the subject and in turn capitalizes on the findings and data analysis. The studies do not clearly inform the audience of the existing controversy of why the networks exist (Menkhof, 2010). Apart from the future earnings, previous research undertaken still indicates that low volume businesses earn higher future returns and vice versa (Koesterich, 2015).
Two different explanations do exist for a reason as to why the value plans do work and are a representation of risk versus the inefficiency of the market (Vogel, 2015). The value strategies have been noted to work exceptionally well by capitalizing on the failure by investors to correctly price securities (Chen, 2009). An analysis of the premiums of the upcoming and established markets indicates that unless an individual firmly believes on the negative side, the quantitative evidence favors the theory that the returns all over the globe compensate the momentum, value and size strategies (Aalto University, 2012). Momentum strategies aid in exploiting the available stock prices by purchasing the hot stocks and selling out the cold shares. Va...