Simple Asset Class ETF Momentum Strategy
Posted in Momentum Investing, Strategic Allocation
May 6, 2013
Does a simple momentum strategy applied to tradable asset class proxies produce attractive results? To investigate, we test a simple strategy on the following eight asset class exchange-traded funds (ETF), plus cash:
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 allocate all funds at the end of each month to the asset class ETF or cash with the highest total return over the past five months (5-1). The five-month ranking period is optimal based on sensitivity tests. Using monthly adjusted closing prices for the asset class proxies and the yield for Cash over the period July 2002 (or inception if not available then) through April 2013 (130 months), we find that: (more…)