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Momentum is one of the most persistently documented phenomena in financial markets: stocks that have outperformed recently tend to continue outperforming in the near term, and underperformers tend to continue underperforming. First formally described by Jegadeesh and Titman in their 1993 paper, momentum has been found in stock markets across the world for over 200 years of historical data. It runs counter to the intuition that "what goes up must come down" — and that is precisely why it has persisted.
Price momentum is typically measured as the total return over a lookback period — most commonly 12 months excluding the most recent month (the 12–1 month return). The exclusion of the last month avoids short-term mean reversion effects. Stocks in the top 10% of 12-month returns are "high momentum" stocks. Cross-sectional momentum — ranking all stocks relative to each other — is the Fama-French style used by institutional investors and by GlobalTrack's factor model.
Behavioural finance offers several explanations. Under-reaction: investors initially underreact to good news, meaning positive information is gradually priced in over months, creating a sustained trend. Herding: as a stock rises, it attracts more attention, buying, and media coverage, reinforcing the trend. Anchoring: investors fixated on a stock's prior low price resist buying at higher levels, causing new positive information to be absorbed slowly. Momentum tends to be stronger in growth stocks, small caps, and during periods of high trading activity.
Momentum strategies are prone to dramatic reversals — "momentum crashes." These tend to occur at market turning points when high-momentum stocks (typically the most popular and crowded trades) sell off sharply as investors rush for the exits simultaneously. The 2009 market recovery and the 2020 COVID rebound both saw violent momentum reversals where the prior winners became the biggest losers. High-momentum positions carry "crowding risk" — everyone is on the same side of the trade.
Falling momentum is one of the earliest indicators that a stock's fundamental story is deteriorating. When a stock that was rising for months suddenly starts lagging its peers, it often signals institutional selling — large funds quietly distributing positions before any public bad news. GlobalTrack tracks 20-day and 60-day momentum as part of its factor scoring and uses momentum decline as a component of the price trend risk signal. Negative 20-day momentum combined with rising volatility is among the most reliable short-term risk flags.
Check these stocks as live examples — compare their metrics side by side.
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