Do stocks with an ADX above 25 go on to beat the rest?

2.1Sample design

Population and frame. The population is US common stocks listed on the NYSE and Nasdaq; funds, ETFs, trusts, preferred shares, warrants and units are excluded. The sampling frame is a fixed universe of 1,767 companies, drawn once when the platform was built and not re-sampled since, in two strata. Stratum 1 is a census of the S&P 500: every company in the index at any time since 1996 whose price history could be recovered, 1,027 companies of which 413 have since delisted; it holds 76% of the index's members in 1996 and at least 96% in every year from 2010. Stratum 2 is 740 large and mid-sized companies outside the index, selected in proportion to the market's sector weights from the stocks that passed a minimum share price of $15 and a minimum average daily trading value of $25 million; 9 of them have since delisted.

Sample. The unit of observation is a stock-week: one stock on one Wednesday. A stock enters a Wednesday's cross-section when it has a valid close that day, a value of the signal and a measured outcome; bars flagged as bad data and returns that cross a change of issuer are left out. This study's sample is n = 1,763 stocks of the 1,767: 1,889,758 stock-weeks on 1,634 Wednesdays from Jan 4, 1995 to Aug 19, 2026, a median of 1,148 stocks per Wednesday (range 820 to 1,371). 331,954 stock-weeks (17.6%) come from the 422 companies that have since delisted. Every stock and every Wednesday carries equal weight.

Representativeness. Table 1 gives the sample by GICS sector beside the S&P Composite 1500: 7.9% of companies would have to change sector for the two to match exactly. By latest market value, 55% of the active companies are large (at least $10bn), 38% mid ($2–10bn) and 6% small. Because Stratum 2 was chosen from companies listed at construction, its history carries survivorship bias. Section 4 repeats the lead result among the stocks that were S&P 500 members on each date, the part of the sample largely free of that bias.

2.2Signals

2.3Measurement

Outcome. The return from the close on the Wednesday to the close 1, 5, 21 and 63 trading sessions later, on closes adjusted for splits and dividends, compared with the same day's median stock; half of all stocks beat the median by construction, so chance is 50 in 100 on every date. No delisting return is added.

Each Wednesday, the stocks showing the reading are scored against the same day's median stock. A state counts on every Wednesday it holds; a cross or breakout counts only on the Wednesday it happens.

Each Wednesday the stocks are ranked on the signal. The study reports how often each fifth of that ranking beat the median stock, and the rank correlation (IC) between the signal and the return that followed.

The t-statistic uses non-overlapping dates only. A result is called proven when |t| is at least 3, it held in at least 60% of years and it is large enough to matter; with 1,470 tests across the studies, a looser bar would pass dozens by luck.

Figure 1 reads every horizon for both readings. Stocks with ADX above 25 beat the median stock 49 times in 100 over the next session, 50 over the next week, 50 over the next month and 50 over the next three months; stocks with ADX below 20 beat it 50, 50, 50 and 50 times. Only the next session shows anything: a faint lag in both groups (t -6.0 and -3.1), too small to count as an edge and not reliable on its own; from a week out, both are indistinguishable from a coin flip. Out of every 100 stocks in a strong trend, 50 beat the median stock over the following month; out of every 100 with no trend, 50 did (Figure 2).

Figure 3 treats ADX as a scale rather than a threshold. The rank correlation between a stock's ADX and its return over the next month was 0.000 (t -0.2), and it held no steady direction: its yearly average pointed one way in 16 of 32 years and the other way in the rest. At no horizon does it clear the bar for a measurable edge.