In terms of market performance, what aspect characterizes assets with positive cross-sectional momentum?

• A. Among the top 25% of performance
• B. In the bottom 50% of performance
• C. Within the top 50% compared to peers
• D. Having consistent performance over multiple periods

Answer: (C)

Assets characterized by positive cross-sectional momentum tend to be those that are performing well relative to their peers, specifically within the top 50% of performance. This concept is rooted in the momentum investing strategy, which posits that assets that have performed well in the past will continue to perform well in the future, and those that have performed poorly will continue to do poorly.

When we speak of assets being within the top 50% compared to their peers, it indicates that these assets are outperforming at least half of the comparable assets in the market, which is a key component of positive momentum. This criterion helps investors identify securities that are gaining momentum based on their recent performance relative to others.

The other aspects presented do not reflect the key characteristic of positive cross-sectional momentum. For instance, being in the bottom 50% directly indicates poor performance, while consistent performance over multiple periods does not specifically address the relative performance aspect essential for assessing momentum among a specific group of assets.