Winners Minus Losers (WML)

Daily Returns: from January 2, 2001.


The Winners Minus Losers Factor (WML) is the return of a portfolio long on stocks with high past returns and short on stocks with low past returns.

Every month t, we (ascending) sort the eligible stocks into 3 quantiles (portfolios) according to their cumulative returns between month t-12 and t-2, as shown in the following table:

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|          Momentum              |        Type of Portfolio        |
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|          1st tercile           |             Loser               |
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|          2st tercile           |             Neutral             |
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|          3st tercile           |             Winner              |
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Then we compute the equal-weighted returns of the first portfolio (low past returns, i.e., “losers”) and the third portfolio (high past returns, i.e., ”winners”).

The WML Factor is the return of the winners portfolio minus the return of the losers portfolio. 


The Eligibility Criteria

A stock traded in BOVESPA is considered “eligible” for year t if it meets 3 criteria:

- The stock is the most traded stock of the firm (the one with the highest traded volume during last year);

- The stock was traded in more than 80% of the days in year t-1 with volume greater than R$ 500.000,00 per day. In case the stock was listed in year t-1, the period considered goes from the listing day to the last day of the year;

- The stock was initially listed prior to December of year t-1.