Momentum funds

Following the development of theories about market efficiency (Markowitz, 1952), theorists posited a pure, perfect financial universe in which stock prices constantly reflect all available information and its rational use. In reality, erratic stock market fluctuations lead one to believe that market behaviour is partly due to psychology. This new behavioural paradigm was officially recognized in 2002, when Daniel Kahneman was awarded the Nobel Prize for having integrated insights from psychological research into economic science. Today, behavioural finance complements the dominant paradigm of market efficiency.

Landry Morin offers funds that take advantage of the market phenomena induced by certain psychological biases of investors, such as the momentum effect.

Momentum, or the persistence of price return, refers to the tendency of stocks that have performed well (or poorly) in the past to perform well (or poorly) in the future. Financial researchers have shown that strategies based on the momentum effect „ namely, buying stocks that have outperformed others during the past 12 months, and selling those that have underperformed during the same period „ will generate positive returns during the following quarter. This selection rule has proven valid in both North American and international markets.

Over the long term, this investment style significantly outperforms the market. When used as part of a long/short strategy, it substantially lowers market risk. Landry Morin pooled funds are an essential part of a diversified portfolio.

To learn more about behavioural finance, please consult our resource library.