Portfolios of stocks formed on recent stock market winners tend to have higher mean returns than portfolios of recent losers over the subsequent year.

Question

Quizplus · Accepted Answer

This is known as the momentum effect, which is a well-documented phenomenon in finance. It suggests that stocks that have performed well over the past year tend to continue to perform well in the near future, while stocks that have performed poorly tend to continue to perform poorly.

Portfolios of Stocks Formed on Recent Stock Market Winners Tend