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Bad Month trading strategies

Posted on July 07, 2008

Within the investment world, mean reversion is a well-documented phenomenon. Simply stated, what goes up must come down, and what goes down must come up. Within that framework, is it possible that bad months for particular assets are followed, more likely than not, by good months? If so, traders would only need to wait for the conclusion of a bad month, scoop up an asset on the cheap, and then wait for a good month of over-performance.Alas, if only it were that easy. World Beta documents the evidence from bad month trading strategies, finding that it does not pay to buy an asset afte...

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