CHAPTER 4

RATIONAL AND NOT-SO-RATIONAL EXPLANATIONS OF MOMENTUM

        A theory is more impressive the greater the simplicity of its premises, the more different kinds of things it relates, and the more extended its range of applicability.

Albert Einstein

IF YOU ASK MOST ACADEMICS about the effectiveness of momentum, they will likely say that it works very well. If you ask them why it works so well, you may get a blank stare. To say we really do not know why momentum works would make this a very short chapter. So instead, I will give a number of possible reasons that may explain why momentum works, even though the underlying answer is still that we do not exactly know.

There are several reasons why it may be a good idea to try to understand ...

Get Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk now with the O’Reilly learning platform.

O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.