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Paying a Higher Price For Momentum Trades

Traders Magazine, August 2003

John A. Byrne

Contrary to popular belief, momentum trading can incur higher average transactions costs than other strategies used by institutional investors, according to a new study. Until recently, the gains from trading stocks that outperform the market were generally regarded as enough to offset the transaction costs. Unfortunately, these assumptions are wrong, according to Donald Keim, a finance professor at the Wharton School of the University of Pennsylvania.

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