Relative strength is an important and often misunderstood investment thesis. In 1998 UCLA professors Narisimhan Jegadeesh and Sheridan Titman did some tests utilizing relative strength over several different time frames. They found a direct statistically significant correlation between relative strength and later price performance up to 12 months later. The most consistent period for defining the initial relative strength was six months.
One of the more important ways to pick stocks and/or funds is by ranking (strongest to weakest) by relative strength. Substantial research has been accomplished in this area, books published by the likes of James O’Shaughnessy, Bill O’Neal, and Charles Kirkpatrick to name just three.
Today I’ll rank International markets by relative strength over 4 time frames. Compare to the last time I ran this screen for non-member consumption HERE! The sort today is by 6 month relative strength.