Momentum Score

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Momentum Scores are based on the exchanges that the security trades in. YCharts currently covers exchanges for two countries, US and Canada. All stocks in US Exchanges are scored separately from all stocks in Canadian exchanges.

A momentum investing strategy is a bet that past returns (1-12 months) can help predict future returns. In layman’s terms, this strategy entails buying stocks that have risen in price hoping they continue to rise. Originally published in Journal of Finance, Returns To Buying Winners and Selling Losers: Impactions for Stock Market Efficiency by Narasimhan Jegadeesh and Sheridan Titman, the authors reported a momentum strategy could yield average monthly returns of 1%.

Momentum-based investors purchase stocks that had recent price appreciation over a specified period. This observation period is up to an investor’s discretion, but the observed period is frequently between 1-12 months. These stocks are then held at the discretion of the buyer for a period of time before being sold. Momentum-based investing is NOT a gurantee that stock prices will rise, instead, it's an observation that there exists a correlation between stock prices and momentum.

In the paper, Fact, Fiction and Momentum Investing, AQR Capital’s Cliff Asness describes explanations for momentum investing fall into two buckets: behavioral or risk-based.

Behavioral Explanation

Behavioral models explains the momentum phenomenon as situations where A) the market has been slow to react to favorable information about a company or B) the market overreacts on favorable information about a company continuing to purchase the stock, even after favorable news has been accounted for.

Risk-Based Explanation

Risk models explains momentum as compensation for economic risk ‘economic risks that affect firm investment and growth rates can impact the long-term cash flows and dividends of the firm that generate momentum patterns.’

YCharts Momentum Score

YCharts provides our users with the Momentum Fractile Score. The Momentum Score ranks companies based on its one year return excluding last week into ten separate fractiles.

These fractiles (1-10) represent the rankings. A score of 10 denotes the Top 10%, a 9 denotes companies in the Top 20-30%, etc. Companies in the ranking are based on geographic exchanges, for instance, all US-traded stocks are compared separately from all Canadian-traded stocks. Please note, an ADR such as Toyota would be considered as a US-traded stock. (TM trades on NYSE).

Saved Screens

Companies (>1M Market Cap) scoring in the Top 10% of Momentum Score

Companies (>1M Market Cap) scoring in the Top 20% of Momentum Score)

It is also possible to create rankings based on a custom starting list. In the saved screen below, we created a stock universe of only SP500 companies and ranked them by one year price return (excluding last week)

Companies in the SP500 ranked by one year price return

Other Fractile Scores

YCharts offers other fractile scoring algorithms. Please see

Market Cap Score

Value Score

Fundamentals Score

Y-Rating

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