Would adding a systematically chosen exchange-traded fund (ETF) or note (ETN) asset class proxy to the base set used in the “Simple Asset Class ETF Momentum Strategy” improve performance? To investigate, we consider adding each of the following 22 ETFs/ETNs (suggested over time by subscribers) one at a time to the strategy:

iPath S&P 500 VIX Short-Term Futures (VXX)

iPath S&P 500 VIX Medium-Term Futures (VXZ)

VelocityShares Daily Inverse VIX Short-Term (XIV)

ProShares UltraShort S&P 500 (SDS)

Guggenheim Frontier Markets (FRN)

iPath DJ-UBS Copper Total Return Sub-Index (JJC)

United States Oil (USO)

JPMorgan Alerian MLP Index (AMJ)

iShares 7-10 Year Treasury Bond (IEF)

iShares TIPS Bond (TIP)

Vanguard Total Bond Market (BND)

iShares iBoxx High-Yield Corporate Bond (HYG)

iShares Core US Credit Bond (CRED)

SPDR Barclays International Treasury Bond (BWX)

PowerShares DB G10 Currency Harvest (DBV)

SPDR Dow Jones International Real Estate (RWX)

UBS ETRACS Wells Fargo Business Development Companies (BDCS)

PowerShares Closed-End Fund Income Composite (PCEF)

AlphaClone Alternative Alpha (ALFA)

IQ Hedge Multi-Strategy Tracker (QAI)

PowerShares Global Listed Private Equity (PSP)

First Trust US IPO Index (FPX)

The base set consists of:

PowerShares DB Commodity Index Tracking (DBC)

iShares MSCI Emerging Markets Index (EEM)

iShares MSCI EAFE Index (EFA)

SPDR Gold Shares (GLD)

iShares Russell 1000 Index (IWB)

iShares Russell 2000 Index (IWM)

SPDR Dow Jones REIT (RWR)

iShares Barclays 20+ Year Treasury Bond (TLT)

3-month Treasury bills (Cash)

We evaluate adding an asset to the base set via its effect on monthly net return-risk ratio (average monthly net return divided by standard deviation of monthly returns, a rough Sharpe ratio). Since the added assets have different sample periods, we rationalize by focusing on the difference in return-risk ratio (the ratio of the base set with the asset minus the ratio of the base set only) over the period the added asset is available. We then relate the resulting 22 differences in return-risk ratio to four characteristics of the respective added assets: (1) average monthly return; (2) standard deviation of monthly returns; (3) average (pairwise) cross-correlation of monthly returns with the base set assets; and, (4) serial correlation of monthly returns. The objective is to determine whether any of these four characteristics explain asset contribution to the momentum strategy. Using dividend/split-adjusted monthly prices for the above 31 asset class proxies as available during July 2002 through November 2014 (a maximum of 149 months), *we find that:*

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