Momentum Factor
Recent price-based signals — has this stock been outperforming, and is the trend healthy?
Definition
The momentum factor captures the empirical observation that stocks which have outperformed recently tend to keep outperforming over horizons of 3 to 12 months. Stocks that have underperformed tend to keep underperforming. The effect is one of the most replicated findings in academic finance.
The original work is Jegadeesh and Titman (1993), "Returns to Buying Winners and Selling Losers." It was later folded into Carhart's four-factor model (1997) as WML (Winners-Minus-Losers), an extension of the Fama–French model. Momentum was a sharp departure from the older view that price history shouldn't predict future returns.
Momentum is typically measured with trailing returns (12-month, 6-month, 3-month, 1-month) and technical indicators like RSI and moving-average crossovers. The intuition is that price is information — it reflects all the slow-moving investor flow, news digestion, and earnings revisions that cumulative returns capture.
How QScoring uses it
QScoring's momentum category combines five inputs: 12-month total return, 3-month return, 1-month return, RSI(14), and the 50-day vs 200-day moving-average position (a binary golden-cross / death-cross). Returns are z-scored against sector; RSI uses a fixed non-monotonic curve so that both oversold-rebound and healthy-momentum regimes score well. See the momentum section for the well-known regime-turn weakness.