Ahead of the launch of @ChainSight_'s HIP-3 perps, I've been doing a lot of research into some of the lesser known instruments and strategies that are common in traditional finance but have yet to make their way onchain. Sharing notes 👇 Notes on Momentum Momentum investing exploits the tendency of winning assets to keep winning and losers to keep losing. First documented by Jegadeesh and Titman (1993), strategies buying past winners and selling past losers generate significant returns over 3-12 month periods. The phenomenon persists across equities, commodities, currencies, and fixed income. How Momentum Is Measured 1. Simple Price Momentum - 12-month return minus most recent month (12-1 momentum) - Excludes recent month to avoid short-term reversal effects 2. Risk-Adjusted Momentum - Return divided by volatility - Combines 6-month and 12-month periods Identifies steady gainers versus volatile spikes 3. Relative Momentum - Performance versus benchmark or peers - Sector-neutral comparisons isolate security-specific momentum Momentum Index Construction MSCI Momentum Indices follow systematic methodology: 1. Filter parent index for liquidity and size 2. Calculate 6 and 12-month risk-adjusted returns 3. Combine scores (typically 50/50) and rank securities 4. Select top momentum stocks until target coverage 5. Weight by score × market cap 6. Apply 5% security and 20% sector caps Semi-annual rebalancing (May/November) with buffer rules preventing stocks from rapidly entering/exiting due to small score changes. How Trading Desks Use Momentum 1. Systematic Strategies - Pure: Long high momentum, short low momentum - Multi-factor: Combines with value, quality, low volatility - Cross-asset: Applied across equities, bonds, commodities, FX 2. Implementation - Risk models use momentum as core factor - Execution algorithms trade high momentum aggressively - Overlay strategies enhance existing portfolios Momentum Products 1. ETFs (MTUM, MTMV, PDP) - Track indices via physical replication - 0.15-0.60% management fees - Daily liquidity with potential tracking error 2. Swaps and Futures - Total return swaps for institutional access - Enables leverage and short positions - Customisable momentum definitions

I've been answering a lot of the same questions about @ChainSight_, which pretty much all point to the same thing: the advanced indexer. 🧵