New Indexes Follow Stocks with Good "Momentum"

AQR Capital Management, LLC has launched the AQR Momentum Indices, a new set of indexes that capture the returns of stocks that have positive "momentum."

According to a press release, the three indexes are: AQR Momentum Index, AQR Small Cap Momentum Index, and AQR International Momentum Index. In conjunction, AQR also introduced a set of three no-load mutual funds based on these indexes: the AQR Momentum Fund, AQR Small Cap Momentum Fund, and AQR International Momentum Fund.

The press release explained that a stock has positive momentum if it has outperformed its peers on a relative basis over the recent past.

AQR said that momentum has been researched extensively over the past fifteen years by both academics and practitioners. In contrast to the efficient market hypothesis, which maintains that past stock prices have no predictive value for the future, the research on momentum suggests that stocks with positive momentum tend to out-perform market averages in the following months.

The new AQR Momentum Indices provide a way of capturing the momentum effect. The indexes, which are rebalanced quarterly, are formed by including those stocks that rank in the top third of their relevant universe based on momentum over the prior twelve months.

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