Momentum Measured

There is an abundance of methodologies for momentum strategies, all backed by professionals and academicians.

The table below provides an overview of common momentum factor indices among index providers and professionals.

Index Details Factor Characteristics Methodology
Index Name: S&P 500
Momentum Index (US) Index Provider: S&P
Dow Jones Indices LLC
12-month price change excluding current month (9-month price change if 12-month data unavailable) Tilt S&P 500 Index (capitalisation- weighted) towards its constituents with weights equal to the product of their market capitalisation weights in Parent Index and Momentum Z-Score
Index Name: MSCI
India Momentum
Index Provider: MSCI
Risk-adjusted Price Momentum (6-month and 12-month) = [(6/12-month Price Return - Local Risk-free Rate)/SD of returns] Tilt MSCI India Index (capitalisation-weighted) towards securities based on their Momentum
Z-scores with weights equal to the product of Momentum Z-scores and their market capitalisation weights in the Parent Index
Index Name: Nasdaq
Factor Family US
Momentum Index Index Provider:
Nasdaq, Inc.
Momentum Strength Score = Sigma(Ret1,Ret3, Ret6, Ret9, Ret12)/5 50 securities with lowest Adjusted Momentum Strength Score are selected from the eligible universe, subject to a set of constraints
Index Name: Nifty 200
Momentum 30 Index Index Provider: NSE
Indices Ltd
6 and 12-month Momentum Ratio (excluding rebalancing month prices) = 6/12-month Price Return/(Ann. SD of lognormal daily returns of the stock for 1 year) Select top 30 stocks from Nifty 200 (capitalisation-weighted) based on their Normalised Momentum Z-scores. Security weights equal the product of their free-float market capitalisation and Normalised Momentum Score

Source: FTSE Russell, MSCI Inc, S&P Dow Jones Indices LLC, NSE Indices Ltd & Nasdaq, Inc. 

Download e-book