Momentum investing

(redirected from Momentum Strategy)

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
Mentioned in ?
References in periodicals archive ?
While these short-term challenges are unfortunate, we remain confident in our ability to continue executing against our Creating Momentum Strategy, which helped us deliver top-line growth of 2.1 percent in fiscal-year 2018.
The rewards to a one-month industry momentum strategy are also sizeable.
Such strategy is called as momentum strategy which involves buying of winner stocks and selling of loser stocks i.e.
A monetary momentum strategy invests in the market when a monetary policy shock is expansionary, and shorts it when the shock is contractionary.
The index underlying the Arrow DWA Country Rotation ETF offers a systematic, price momentum strategy that capitalizes on changing international market trends.
The sample size is small, but even taking the broader US mutual fund universe and screening for those that exhibit momentum strategy tendencies shows widespread underperformance.
They concluded that having a momentum strategy will profit the speculators at the expense of the hedgers.
Hameed and Yuanto (2002) also examined 6 emerging stock markets of Asia and reported that "unrestricted" momentum strategy has resulted in non significant momentum profits.
The standard index returned an annualized 4.57% from 1999 through 2012, while an equally-weighted portfolio gained 9.06%, the momentum strategy added 8.92%, an equal-risk index climbed 8.33%, and the fundamentally-weighted strategy earned 7.63%.