This factor aims to capture the stock momentum effect at different time scales by calculating the moving average price of different time windows and normalizing it with the current closing price. Since the absolute values ​​of stock prices vary significantly, directly using the moving average price may lead to poor cross-sectional comparability of the factor. Standardization can eliminate this magnitude difference, so that the momentum signals of different stocks have a unified comparison benchmark.

The core idea of ​​this factor is to use the moving average price on multiple time scales to capture the momentum or reversal effect of stocks in different cycles. Short-term moving averages (such as L=3,5,10) are often more sensitive to short-term price fluctuations and may reflect short-term momentum; while long-term moving averages (such as L=20,50,100,200, etc.) focus more on trends and may reflect medium- and long-term momentum or reversals. Through multi-period analysis, the momentum characteristics of stocks can be more comprehensively understood.

In addition, this factor can also be used in combination with other factors, such as liquidity factors and outstanding share ratio factors, to perform cross-sectional neutralization processing, so as to obtain a purer momentum signal and improve factor effectiveness. Normally, the standardized moving average momentum factor holds stocks with strong momentum in the long portfolio and stocks with weak momentum in the short portfolio, thereby obtaining excess returns brought by the momentum effect.

This factor can not only be used to discover the momentum effect, but also to build a reversal strategy. The specific application depends on the analysis and judgment of momentum at different time scales.