What is the momentum factor?
The empirical pattern that recent winners continue to outperform recent losers over horizons of 3 to 12 months. One of the most reliable equity factors documented in academic literature, distinct from value and quality.
The momentum factor (Jegadeesh-Titman 1993) sorts stocks by their trailing 6-12 month total returns and finds that the winners continue to outperform losers over the next 3-12 months. The annual excess return historically averaged 7-10 percentage points, robust across decades and geographies. The mechanism is behavioral (under-reaction to news and confirmation bias) and structural (delayed analyst revisions, fund flows reinforcing trends).
Momentum vs value
Momentum and value have historically been negatively correlated factors: when value outperforms, momentum tends to lag, and vice versa. AQR research has documented that a value-plus- momentum portfolio outperforms either factor alone with lower drawdowns. The two factors complement rather than compete.
Where momentum sits in invest-like
The 7-framework consensus screen is fundamentals- driven and explicitly not a momentum strategy. The screen will buy a deeply out-of-favor stock if its fundamentals fit the seven rubrics. That makes the consensus screen orthogonal to momentum and a natural complement for investors who run both. The /track-record/ page documents the screen's forward returns; the cohort includes both momentum-positive and momentum-negative names at entry.
Frequently asked questions
What is the momentum factor?
The pattern that stocks with strong trailing 6-12 month returns continue to outperform over the next 3-12 months. The Jegadeesh-Titman 1993 study is the canonical academic source.
Why does momentum work?
Under-reaction to fundamental news (investors digest slowly), delayed analyst revisions (estimates lag stock-price moves), and fund-flow reinforcement (winners attract inflows that bid them up further).
Does invest-like use momentum?
Not explicitly. The 7-framework consensus is fundamentals-driven and will buy out-of-favor stocks if they fit the rubric. Momentum is orthogonal and a natural complement.
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