Seasonal or calendar effects may help to explain some of the reason for success in the momentum investing strategy.
If a stock has performed poorly for months leading up to the end of the year, investors may decide to sell their holdings for tax purposes causing for example the January effect.
[5] Richard Driehaus (1942—2021) is sometimes considered the father of momentum investing, but the strategy can be traced back before Donchian.
[6] The strategy takes exception with the old stock market adage of buying low and selling high.
[10] This finding has been confirmed by many other academic studies, some from the 19th century,[11][12][13] though momentum strategies are associated with an increased risk of crashes and major losses.
Depending on which past period was taken as a reference and how long the securities were held thereafter, a different magnitude of effect was observed.
The share price only rises gradually with a delay until the true higher value is only reached after a few months.