Momentum, Acceleration, and Reversal
Volume 13, Number 1, First Quarter 2015
James X. Xiong and Roger G. Ibbotson
This paper studies the impact of accelerated stock price increases on future performance. Accelerated stock price increases are a strong contributor to both poor future performance and a higher probability of reversals. It implies that accelerated growth is not sustainable and can lead to drops. The acceleration mechanism is also able to reconcile the well-documented 2–12 month momentum phenomenon and 1-month reversal.