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The Momentum Trading Strategy

In: Encyclopedia of Finance

Author

Listed:
  • K. C. John Wei

    (The Hong Kong Polytechnic University)

  • Linti Zhang

    (The Hong Kong Polytechnic University)

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.

Suggested Citation

  • K. C. John Wei & Linti Zhang, 2022. "The Momentum Trading Strategy," Springer Books, in: Cheng-Few Lee & Alice C. Lee (ed.), Encyclopedia of Finance, edition 0, chapter 46, pages 1109-1121, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-91231-4_46
    DOI: 10.1007/978-3-030-91231-4_46
    as

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