The Informational Role of the Most Recent Month in Industry-Level Momentum Strategies

This paper investigates the impact of information from the most recent month, commonly excluded from momentum portfolio construction, on subsequent industry-level momentum performance. Using the Fama-French 48 industry portfolios from 1975 to 2024, I compare standard 12-1 momentum strategies with 12-0 variants using a long-only approach, conditioning performance on prior-month returns and volatility. While conventional momentum strategies simply remove the most recent month to mitigate documented short-term reversal effects in stock returns, my results show that the behavior of the recent month contains economically meaningful information that helps explain differences in momentum performance across different market regimes in the Fama–French 48 industry portfolios. These findings indicate that the most recent month provides meaningful information for momentum strategies, rather than serving just as a mechanical function in portfolio construction.