An Improved Approach to Momentum Investing

Conditioning Price Trends on Informative Trading Days

This week, I discuss a recent academic paper that challenges the traditional view of momentum. Rather than treating all past returns as equally important, the paper shows that a small subset of trading days, such as earnings announcement days, carries much more information and plays a disproportionate role in predicting future momentum returns.

In this post, I discuss the main results and test whether conditioning on these specific days can meaningfully enhance equity momentum strategies.