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Momentum Model

The Momentum Model forecasts future alpha from an objective measure of each stock’s overall momentum (growth). The model’s rankings are a synthesis of six individual momentum-oriented factor rankings drawing on reported earnings, analyst estimates, and price changes.

This is a “building block” model; it is not intended to stand alone. The Momentum Model complements, but does not duplicate the characteristics of other forms of analysis; it is intended to be used as one element of a complete stock selection system.

Our design goal for this model is to maximize its ability to discriminate between attractive and un-attractive issues. This is measured as the difference in alphas generated by a model’s top (1st) and bottom (10th) deciles over the long-term time horizons of interest to institutional investors. Momentum Model alpha forecasts are predictive out as far as three years in the future.

We developed the Momentum Model in 1997 and began publishing Momentum Model rankings from live data in 1998.

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