The recent book Quantitative Momentum (Gray, Wesley R.; Vogel, Jack R. (2016-09-13). Quantitative Momentum: A Practitioner’s Guide to Building a Momentum-Based Stock Selection System (Wiley Finance)) cites studies arguing that smooth momentum dramatically outperforms volatile momentum, along with avoiding “lottery” stocks.
The “Frog in the Pan” algorithm is:
FIP = sign(Past return) * [% negative - % positive]
“The FIP looks at the past 252 trading days for all high-momentum stocks and tabulates the percentage of trading days with negative returns and the percentage of trading days that are positive. These two calculation components are subtracted from one another and multiplied by the sign of the generic momentum signal (i.e., 12-month total return, skipping the first month).”
“For example, say stock ABC has a generic momentum calculation of 50 percent. If 35 percent of the past 252 trading days are negative, 1 percent of trading days are flat, and 64 percent are positive, then ABC’s . The more negative the FIP, the better.”
I couldn’t figure out how to implement this as a ranking formula. If anyone could inform me how, or if it is possible, it would be greatly appreciated. (If not, maybe it is at least interesting to you! Thank you).