John Hinrichs

John Hinrichs is a Certified Financial Planner in Bellaire, TX with 25 years experience in estate planning.

The author states that his research found that momentum and contrarian strategies constitute anomalies used by investors as they strive to earn abnormal returns. In this work the author adjusted the returns using the Nobel Prize winning Farma and French three-factor model. 

This study displayed the results obtained by going long and short on ETFs at the same time. He assessed the results of going long on the winners and short on the losers or going long on the losers and short on the winners. He showed that the annualized momentum abnormal returns range from 8.4 to 13.5 per cent over holding periods of 4 to 39 weeks. 

He acknowledged the best results were realized with formation and holding periods of one day and one week. His research method did not include a way to segregate the sources of the abnormal momentum and contrarian returns from the common pool of EFTs under evaluation. 

Even after considering transaction costs the author argued that momentum and contrarian returns for the EFTs are statistically significant and economically viable. He suggested that his results indicated that investors and arbitrageurs can use ETFs to achieve momentum/contrarian abnormal returns.

Source: Journal of Asset Management, 9(4), 289-299.

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