Momentum investing

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Momentum Investing

An investment philosophy in which the investor buys (or short sells) securities that had been performing well over the previous three to 12 months and sells those that have been performing poorly over the same period. This is a form of short-term investing based on the underlying belief that trends generally continue for a long period of time. This belief is at odds with efficient markets theory, because momentum investing assumes that even inefficiently priced securities tend to remain inefficiently priced. Economists therefore disagree on whether momentum investing is a sound investment strategy. See also: Market momentum.

Momentum investing.

A momentum investor focuses on stocks that are rising in value on increasing daily volume, and avoids stocks that are falling in price or that are perceived to be undervalued.

The logic is that when a pattern of growth has been established, it will continue to gain momentum and the growth will continue. Momentum investing is essentially the opposite of contrarian investing.

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Another potential benefit to this momentum strategy is that it may be used in tactical and strategic allocations when combined with other smart beta products or asset classes.
They concluded that having a momentum strategy will profit the speculators at the expense of the hedgers.
Rouwenhorst (1998) also implemented momentum strategy in 12 developed countries of Europe and found that short-term momentum effect existed in all 12 stock markets and it is profitable.
The iShares MSCI Europe Momentum Factor UCITS ETF is based on the momentum strategy.
Daniel and Moskowitz show that a dynamic strategy based on their analysis significantly outperforms a static momentum strategy prone to such crashes.
They analyze a momentum strategy with a lagged six-month ranking period and a subsequent one-month holding period, and find that the strategy's risk-adjusted performance improves when they take into account the dynamic factor loadings.
1) The momentum strategy discussed below combines individual currency-momentum strategies into an equally-weighted portfolio of the same 20 currencies.
Given the results of past studies cited in the literature review, a momentum strategy should provide a superior portfolio performance while a contrarian approach might not provide any benefits.
The second row of table 2 tracks the average monthly return from a momentum strategy.
The Momentum Builder ETFs seek to track a momentum strategy index and, as a result, may experience more volatility than funds that track more broadly based conventional indexes.
The iShares MSCI World Momentum Factor UCITS ETF is based on the momentum strategy.
The ETN capitalizes on a unique momentum strategy that seeks to increase exposure to the sub-indices that outperform the S&P 500 and reduce allocation for the underperformers.