Momentum
Definition
The tendency of assets that have performed well recently to continue performing well, and vice versa.
Explanation
Momentum is one of the most robust market anomalies, documented across every major market, asset class, and time period. Jegadeesh and Titman (1993) showed that buying past winners and selling past losers generated significant excess returns. The typical implementation uses 12-month trailing returns (excluding the most recent month) to rank stocks. Momentum works because of behavioral factors: herding, underreaction to news, and confirmation bias. The primary risk is momentum crashes — sharp reversals that occur during market regime changes (like March 2009).
How Stoquity Uses This
Stoquity incorporates momentum analysis across its portfolio management platform, providing real-time monitoring and AI-powered insights for every portfolio.