Indexation of Momentum Effects
40 Pages Posted: 28 May 2004
Date Written: August 2003
Momentum is now viewed as another factor of equity returns in addition to such factors as beta, market capitalization, and market-to-book ratio. In this paper, I propose indexation of momentum effects to pave the way for development of the momentum-based investment products and for improved performance evaluation of the actively-managed funds. In this paper, I describe a family of the Momentum Index to be created, explain how to construct the Momentum Indexes, and demonstrate historical performance of the Momentum Indexes. Finally, I discuss implications and applications of the Momentum Indexes to practical investment management.
Keywords: Momentum Index, momentum effects, indexation
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