Vanguard's misleading advertisement -- style momentum works

Vanguard has an advertisement that says

"Simple truth: performance chasing is a losing investment strategy"

Apparently they are too lazy to test their statements before making them, as the following paper on style momentum shows:

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76815Using Style Index Momentum to Generate AlphaSamuel L. Tibbs East Carolina University - Department of Finance Stanley G. Eakins East Carolina University - College of Business William DeShurko

401 Advisor, LLC Journal of Technical Analysis, Forthcoming Abstract: Russell style indexes exhibit significant momentum, particularly after medium term out- and underperformance. The existence of this momentum produces a diversified, index-based low-cost means to exploit momentum by incorporating relative style index performance into tactical allocation strategies. Such style index momentum trading strategies have outperformed on both a raw and risk-adjusted return basis, with the long minus short portfolio generating an average 9.25% annual return over the 34-year period analyzed. Although the excess returns vary, they are robust through time and after controlling for potentially confounding effects. Additionally, the returns are not driven by any single style index and portfolio reconstruction is, on average, required every six months. Keywords: Momentum, Style Investing JEL Classifications: G14

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Reply to
beliavsky
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wrote

Full paper at

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When the authors re-do their research to include transaction costs, fund fees, taxes and so on, then what they find might be interesting. Until then, their thesis has not been tested.

-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
Elle

That is such a clear, concise description of how to make money investing in the stock market, it is hard to see how anyone who can read plain English would fail to be convinced by it and would pass up an opportunity for investment success by following those simple steps.

-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
Don

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