Momentum
Betting that what has been rising keeps rising, and what has been falling keeps falling.
Momentum is the observation that recent winners tend to keep winning for a while and recent losers keep losing. The classic version ranks stocks by their return over the past year, skipping the last month, and buys the top while shorting the bottom. It has been documented across markets and decades, and it is also the family where our logbook has spent the most attempts.
Two things make it treacherous for a beginner. Over short horizons of one month it tends to reverse rather than continue. And a long-only version tested during a rising market looks brilliant for the wrong reason: the market rose, and any basket of stocks rose with it. The logbook's entry on short-term momentum in large caps found no convincing evidence of selection once the market's contribution was removed, and closed the family for further tests.
Where this word comes up
First needed in the log entry H-044 · Short-term momentum in large caps: no robust edge in our test.
From the same entry: Betting against losers, High turnover, Liquid names, Multiple testing, Relative strength ranking, Shuffle test, The null.