A rolling-forward strategy of going long firms purchased by previously successful investors and shorting firms purchased by previously unsuccessful investors results in excess returns of 5 basis points per day.
Glassman points out that the study covers only the time period from January of 1990 through November of 1996. Nonetheless, Glassman ends up endorsing the study and endorsing a policy of choosing a portfolio that is not well diversified.
I disagree with that advice. Over a short time horizon, all sorts of risky strategies can appear to be profitable, particularly in a rising stock market. Look at all the people who were successful day-traders in 1998-1999, and who lost everything when the market started to go down.
The overwhelming body of empirical evidence suggests that buying an index fund and holding it is both safer and more profitable than trying to beat the market.
For Discussion. Why would day-trading tend to be more profitable in a rising market than in a falling market?