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Optimal Monthly Cycle for SACEMS?

Steve LeCompte | | Posted in: Calendar Effects, Momentum Investing, Strategic Allocation

Guide Calendar Effects Events and cycles

Key Insight

SACEMS gross CAGRs and MaxDDs vary across 21 monthly ranking cycles (EOM-10 to EOM+10); cycles ending after month-end are generally weaker, and MaxDDs are mostly shallowest near EOM (Feb 2006–Oct 2022; Top 1, EW Top 2, EW Top 3; data-snooping caveat).

Is there a best time of the month for measuring momentum within the Simple Asset Class ETF Momentum Strategy (SACEMS)? To investigate, we compare 21 variations of baseline SACEMS by shifting the monthly return calculation cycle from 10 trading days before the end of the month (EOM) to 10 trading days after EOM. For example, an EOM+5 cycle ranks assets based on closing prices five trading days after EOM each month. We focus on gross compound annual growth rate (CAGR) and gross maximum drawdown (MaxDD) as key performance statistics for the Top 1, equally weighted (EW) Top 2 and EW Top 3 portfolios of monthly winners. Using daily dividend-adjusted prices for SACEMS assets during mid-February 2006 through mid-October 2022, we find that:

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Calendar Effects guide

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Further Reading

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