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The most profitable proven trading strategy appears to be momentum investing, which has consistently earned non-zero returns over time . This strategy involves selecting stocks based on their past performance over a specific time period, such as two to twelve months. It has been observed to earn average monthly returns of 1.57% over the period from 1965 to 2014, and even larger returns of 2.27% in the most recent ten-year period . However, it is important to note that the profitability of this strategy may be affected by transaction costs, especially when trading in smaller stocks . Nevertheless, a strategy that focuses only on the winner portfolio and avoids trading the loser portfolio has been found to earn strong and persistently abnormal profits, even after accounting for transaction costs .
Related Questions
What is the most profitable trading strategy?4 answersAmong the various strategies studied, momentum investing appears to be the most profitable trading strategy. It consistently earns non-zero returns over a long time period, with an average monthly return of 1.57% from 1965 to 2014. In recent years, the return has been even larger at 2.27% per month. However, profitability net of transaction costs is weak due to trading in small stocks with high transaction costs, especially for the loser portfolio. To overcome this, a strategy that focuses only on the winner portfolio and avoids selling the costly loser portfolio can still earn strong and persistently abnormal profits, even after transaction costs.What is the best strategy in forex for make profit?5 answersThe best strategy in forex for making a profit involves reducing risks and increasing profitability by considering economic and political factors, avoiding emotional investment, and using machine learning algorithms. One approach is to use a combination of deep learning algorithms, such as Gated Recurrent Unit (GRU) and Convolutional Neural Network (CNN), to predict the next day's signal (BUY, HOLD, or SELL). Another strategy involves using a combination of technical indicators, such as Relative Strength Index and Triangular Moving Average Bands, along with price value, to generate buy and sell signals. Additionally, a dynamic currency trading strategy that predicts future returns and changes in global volatility in FX markets has shown remarkable performance. Furthermore, a strategy based on neural networks has demonstrated profitability and the lowest risk of loss. Finally, a two-level decision system combining Probit regression and Random Forest has been proposed for intraweek foreign exchange speculation, improving prediction accuracy and identifying good times to enter or exit the market.What are the best stock investment strategies?5 answersThe best stock investment strategies include combining the BCD model mispricing with momentum rankings. Holding an equally-weighted portfolio of stocks that are the most underpriced and have top momentum has shown to generate significant returns, with an average monthly return of 3.18 percent and a monthly Jensen's alpha of about 1.5 percent. In the Indian stock market, investors use both fundamental and technical analysis, with size-based strategies, momentum strategies, and following FIIs investment behavior being the most widely used investment strategies. Additionally, a combination of fundamental and technical analysis has become more prevalent in recent years, with a shift from purely technical analysis-based strategies. In the era of big data, using Markowitz's portfolio theory and Python, an optimal investment portfolio can be obtained by selecting representative stocks and analyzing their expected return, standard deviation, and Sharpe ratio.What are the most profitable investment strategies?5 answersVarious investment strategies were modeled and examined for their tradeoffs between risk and return. The strategies included combinations of stocks and bonds, with some strategies switching between investment types, others transitioning, and some changing based on stock market performance. Another profitable investment strategy involves using a speculative download mechanism in BitTorrent private communities, which identifies swarms with high upload potential and automatically downloads and seeds them. This strategy resulted in a median 207% return on investment. Additionally, portfolio management strategies based on spillover indices can provide useful information for maximizing portfolio value in Central and Eastern European and Southern and Eastern European stock markets. For with-profit life insurance contracts, different investment strategies were evaluated, resulting in a discount in the certainty equivalent rate of return for giving up intergenerational risk transfer. Finally, investing in sovereign bond funds representing high GDP-per-capita countries has been found to be a profitable strategy, with no strong relationship between sustainability and GDP per capita.What is the most profitable portfolio?5 answersThe most profitable portfolio varies depending on the specific context and time period analyzed. In the context of portfolio design approaches, the mean-variance portfolio (MVP) performed the best in terms of risk-adjusted returns on out-of-sample data. However, the autoencoder portfolios outperformed their counterparts in terms of annual returns. In the analysis of momentum and contrarian portfolios, the contrarian portfolios were found to be the most profitable, particularly within the cross-sectional analysis. The optimal portfolio of risky assets, taking into account the investor's attitude to risk, can be determined by combining the efficient frontier with investor-specific indifference curves. In the study of optimal portfolios composed of LQ45 stocks, the optimal portfolio consisted of specific stocks and was only effective for a limited time period. Finally, in the analysis of a portfolio mimicking Bitcoin, mixed results were found in terms of portfolio returns and standard deviation compared to Bitcoin.Which trading strategy beats buy and hold?5 answersThere are several trading strategies that have been shown to outperform the buy-and-hold strategy. Hui and Chan (2017) construct a time-dependent strategy that shows mixed results. Baumann proves mathematically that control-based trading strategies can generate positive gains, even with small and unknown trends. Hui and Chan also find that their strategy outperforms the buy-and-hold strategy when tested on real estate and equity indices. Tran showcases a wavelet trading strategy that consistently beats the market, contradicting the efficient market hypothesis. Tran further demonstrates that the wavelet trading strategy outperforms the market at a fast rate, providing a counterexample to the claim that the market is unbeatable.
