How is ‘Momentum’ Measured?
There is an abundance of methodologies implemented for momentum strategies. 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
Index Provider: MSCI Inc. |
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.
