Momentum

Portfolio & Strategy

The tendency for asset prices that have been moving in one direction to continue moving in that direction. Momentum strategies profit by buying strong performers and selling weak performers, the opposite of mean reversion. Momentum is supported by behavioral factors (investors chase winners) and technical factors (trend-following algorithms). Momentum strategies can suffer sudden reversals when market sentiment shifts sharply.

Mentioned in this definition

Mean Reversion

More in Portfolio & Strategy

Asset AllocationBenchmarkDiversificationEfficient FrontierGamma Exposure (GEX)HedgeLong PositionMarket RegimesShort PositionTrend Following

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