An Anatomy of Trading Strategies Jennifer Conrad University of North Carolina Gautam Kaul University of Michigan In this article we use a single unifying framework to an- alyze the sources of profits to a wide spectrum of return- based trading strategies implemented in the literature. We show that less than 50%of the 120 strategies imple- mented in the article yield statistically significant profits and,unconditionally,momentum and contrarian strate- gies are equally likely to be successful.However,when we condition on the return horizon(short,medium,or long) of the strategy,or the time period during which it is im- plemented,two patterns emerge.A momentum strategy is usually profitable at the medium(3-to 12-month)hori- zon,while a contrarian strategy nets statistically signifi- cant profits at long horizons,but only during the 1926- 1947 subperiod.More importantly,our results show that the cross-sectional variation in the mean returns of in- dividual securities included in these strategies plays an important role in their profitability.The cross-sectional variation can potentially account for the profitability of momentum strategies and it is also responsible for atten- We thank Jonathan Berk,Elazar Berkovitch,Kobi Boudoukh.Gene Fama, Michael Ferguson.Julian Franks.Thomas George,Richard Green,Mustafa Gultekin,Narasimhan Jegadeesh,Charles Jones,Roni Michaely,Steve Manaster, Vasant Naik,Sheridan Titman,Jamie Zender,and seminar participants at Ari- zona State University,Cornell University.Michigan State University,University of Arizona,University of British Columbia,University of North Carolina,Uni- versity of Notre Dame,University of Utah,the Winter Finance Conference at the University of Utah,the American Finance Association Meetings,San Francisco, and the Summer Finance Seminar at Tel Aviv University for helpful comments and suggestions.We are especially thankful to an anonymous referee and Bob Ko- rajezyk and Ravi Jagannathan for helping us focus on the main issues addressed in this article,to Michael Cooper for his invaluable research assistance,and to Sonja Dodenbier for helping prepare this manuscript.Partial funding for this project is provided by the Kenan-Flagler Business School.University of North Carolina and the University of Michigan Business School.Address correspon- dence to Gautam Kaul,Department of Finance,University of Michigan Business School,Ann Arbor,MI 48109-1234. The Review of Financial Studies Fall 1998 Vol.I1,No.3.pp.489-519 C 1998 The Society for Financial Studies