Multi-Dimensional Insights into Theoretical and Empirical Studies on Global Momentum and Reversal Strategies

Abstract

As a typical anomaly trading strategy in financial markets, the core logic of momentum and reversal strategies is based on the momentum effect (where strong performers continue to outperform) and the reversal effect (where extreme performance is followed by a countermovement), respectively. This paper systematically organizes the research findings on momentum and reversal strategies, and analyzes seven dimensions: existence testing, influencing factors, strategy construction, formation mechanisms, risk control, research gaps, and future recommendations. Market structure, investor composition, and macroeconomic environment are key factors affecting the effectiveness of the strategies. Existing strategies have evolved from single price-volume factors to multi-factor integration, and theories such as delegated investment and behavioral biases provide diverse explanations for the formation of these effects. Risk control needs to be achieved through a full-process system of pre-prevention, in-process monitoring, and post-adjustment. At the same time, current research still has gaps in areas such as cross-market synergy mechanisms, adaptability to extreme market conditions, and the application of high-frequency data. Based on this, this paper suggests that future research should strengthen the study of multi-asset linkage, optimize the risk control module of strategies, and combine machine learning to enhance the dynamic adjustment capability of strategies.