1 year momentum is a technical factor. It involves buying stocks with positive momentum over a 1 year time period. Momentum or technical indicators leverage behavioural finance. Investors succumb to ‘herd bias’ which cause stocks to be over or under sold. A positive 1 year momentum could indicate that a stock will continue to rise while a negative momentum could indicate its continued downtrend.
To calculate a stocks 1 year momentum, we divide the current price by the closing price 1 year previous.