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Quantitative Finance · Glossary

What is Residual momentum, industry momentum?

Also known as: residual momentum · industry momentum

Definition 5.2 Strategies I: Equities and Futures · Chapter 5 — Momentum

Residual momentum ranks stocks on the sum of their factor-model residual returns over the formation window, divided by the residuals’ standard deviation, instead of on their total returns. Industry momentum ranks industries on their past returns and buys the stocks of the winning industries and sells those of the losing ones.

The three momentum books on the synthetic market, net of ten basis points per unit traded: cumulative returns (gross exposure one). Data: s1_momentum.book.
Figure 5.1. The three momentum books on the synthetic market, net of ten basis points per unit traded: cumulative returns (gross exposure one). Data: s1_momentum.book.
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