From the Economist:
The momentum effect drives a juggernaut through one of the tenets of finance theory, the efficient-market hypothesis.
Even the high priests of efficient-market theory have acknowledged the momentum effect. Well-paid fund managers have spent decades trying to find ways to beat the market. But you have to wonder why they bother devoting so much money and effort to researching the fortunes of individual companies when the momentum approach appears to be easy to exploit and has been around for a long time.
Martin Lueck was one of the three founders of AHL, one of the more successful CTAs [regulatory term for trend following], and now works for another trend-follower, Aspect Capital. “Trends occur because there is a disequilibrium between supply and demand,” he says. “The asset is trying to get from equilibrium price A to equilibrium price B.”
Or you can try to predict tomorrow…