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The Momentum Trading Strategy

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Encyclopedia of Finance

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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.

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Authors and Affiliations

  1. School of Accounting and Finance, The Hong Kong Polytechnic University, Kowloon, Hong Kong

    K. C. John Wei & Linti Zhang

Authors
  1. K. C. John Wei
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  2. Linti Zhang
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Correspondence to K. C. John Wei .

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Editors and Affiliations

  1. Rutgers School of Business, Rutgers, The State University of New Jer, Piscataway, NJ, USA

    Cheng-Few Lee

  2. Phoenix, AZ, USA

    Alice C. Lee

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Wei, K.C.J., Zhang, L. (2021). The Momentum Trading Strategy. In: Lee, CF., Lee, A.C. (eds) Encyclopedia of Finance. Springer, Cham. https://doi.org/10.1007/978-3-030-73443-5_46-1

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  • DOI: https://doi.org/10.1007/978-3-030-73443-5_46-1

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  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-030-73443-5

  • Online ISBN: 978-3-030-73443-5

  • eBook Packages: Springer Reference Economics and FinanceReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences

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