From the course: Behavioral Finance Foundations

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Short-term momentum, long-term reversal

Short-term momentum, long-term reversal

From the course: Behavioral Finance Foundations

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Short-term momentum, long-term reversal

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- [Instructor] One very, very powerful phenomenon stocks, it seems to be driven by behavioral biases, is what's called short-term momentum, long-term reversal. Let me show you an example. So I'm here on the Yahoo Finance page, and what I've done is pull up a chart showing Lululemon and Capri Holdings. Now you may know Capri Holdings better as the company behind Michael Kors, they make a variety of women's fashion items. So, look what happened to Capri Holdings and Lululemon over, say, a one and a half year time period. From 2013, as we see at the bottom, through mid 2014. Well, Capri Holdings, their stock in this year and a half period is up 77%, 76.57 to be more precise. So you put $100 into the stock, a year and half later, it's worth 175, 180. Look what happened to Lululemon during the same period. You put $100 into the stock, it falls 40%. A year later, year and a half later, it's only worth 60 bucks a share. That's…

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