In this paper, we use a single unifying framework to analyze the sources of profits to a wide spectrum of return-based trading strategies implemented in the literature.

We show that less than 50 percent of the strategies implemented in the paper yield statistically significant profits and, unconditionally, momentum and contrarian strategies are equally likely to be successful.

However, when we condition on the return-horizon short, medium, or long of the strategy, or the time-period during which it is implemented, two patterns emerge.

A momentum strategy is usually profitable at the medium three- to month horizon, while a contrarian strategy nets statistically significant profits at long-horizons but only during the subperiod.

More importantly, our results show that the cross-sectional variation in the mean returns of individual securities included in these strategies plays an important role in the profitability of the strategies. The cross-sectional variation can potentially account for the profitability of momentum strategies and it is also responsible for attenuating the profits from price reversals to long-horizon contrarian strategies.

REVIEW OF FINANCIAL STUDIES Vol.

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EconPapers: An Anatomy of Trading Strategies

Conrad University of North Carolina Kenan-Flagler Business School Gautam Kaul University of Michigan, Stephen M. Ross School of Business. Abstract In this paper, we use a single unifying framework to analyze the sources of profits to a wide spectrum of return-based trading strategies implemented in the literature. Conrad University of North Carolina Kenan-Flagler Business School email Kenan-Flagler Business School Chapel Hill, NC United States. Gautam Kaul Contact Author University of Michigan, Stephen M.

Ross School of Business email Tappan Street Ann Arbor, MI MI United States Phone Fax. Not Available for Download.

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An Anatomy of Trading Strategies by Jennifer S. Conrad, Gautam Kaul :: SSRN

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