Momentum Factor Effect in Stocks
Long 12-1 month winners and short losers in a stock universe — the cross-sectional equity momentum recipe.
Definition
Skip last month, rank on prior 12-month return, long top decile, short bottom, hold 1 month (or 3–12 with overlapping portfolios). Filter size and price. Crashes when losers bounce together (2009, 2020).
Why it matters
It is the most replicated equity factor after value/size. Dynamic vol scaling (Barroso / Daniel-Moskowitz) is how grown-ups run it.
Case
March–May 2009: loser rebound crushes the short leg. Unscaled momentum has a left tail that a Sharpe on 1927–2013 hides.
How to read it
12-1 vs 6-1, overlapping holds, and a crash overlay. Report the short-leg borrow. Winner-only is a different product.
Key papers
Landmark references with real publisher or arXiv links — not token-overlap noise.
- Returns to Buying Winners and Selling LosersJegadeesh, Titman · 1993 · Journal of FinanceThe J/K momentum design.