We construct a zero-net-worth uninformed "naive investor" who uses a random portfolio allocation strategy. We then compare the returns of the momentum strategist to the return distribution of naive investors. For this purpose we reward momentum profits relative to the return percentiles of the...

We consider a passive 1/N naive diversification strategy which is long in the equally weighted portfolio of stocks feasible for trading and short in the risk-free asset. We then examine the profi tability, exposures to risk factors, idiosyncratic variance as well as the relation between the...