The Momentum Trading Strategy

K. C. John Wei () and Linti Zhang ()
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K. C. John Wei: The Hong Kong Polytechnic University
Linti Zhang: The Hong Kong Polytechnic University

Chapter 46 in Encyclopedia of Finance, 2022, pp 1109-1121 from Springer

Abstract: Abstract A cross-sectional momentum strategy that buys past winners and simultaneously sells past losers based on stock performance in the past 3–12 months is profitable in the USA and many international markets. The profitability of the cross-sectional momentum strategy varies across firms, countries, and market states. Recent studies find that a time-series momentum strategy that longs securities with positive excess returns in the previous 12 months and shorts securities otherwise also generates persistent and high profits. This survey entry reviews the literature on the momentum strategies and the possible explanations for the momentum profitability.

Keywords: Past winners; Past losers; Momentum strategy; Individual momentum; Industrial momentum; Time-series momentum; Intraday momentum; International momentum; Underreaction; Overreaction; Overconfidence; Self-attribution; Valuation Uncertainty; Conservatism; Representative heuristic; Gradual information diffusion; Individualism (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/978-3-030-91231-4_46

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