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ETF Momentum Strategy Updates/Extension

| | Posted in: Momentum Investing

Over the past few days, in the background, we have updated and rationalized “Simple Sector ETF Momentum Strategy” (update pending) and “Doing Momentum with Style (ETFs)” (update just published). Updated means adding data for December 2011. Rationalized means making the two analyses more similar in data processing and presentation approaches.

We have also put together, and will soon publish, a new “Simple Asset Class ETF Momentum Strategy” that extends the general methodology to a set of exchange-traded funds (ETF) plus cash that proxy for nine asset classes.

During this process, because of growing complexity, we introduced logical programming that automates identification of monthly ETF winners and loading of subsequent monthly returns. In validating this programming, we found errors in old winners data for “Doing Momentum with Style (ETFs)” that were material to findings because they occurred during high market volatility. Specifically, the errors led to incorrect conclusions that a simple momentum strategy applied to style ETFs likely outperforms both an equally weighted portfolio of style ETFs and a simple momentum strategy applied to sector ETFs. After correction of the errors in today’s update, findings are that a simple momentum strategy applied to style ETFs performs about the same as an equally weighted portfolio of style ETFs and a simple momentum strategy applied to sector ETFs. We apologize for the errors.

We found no such errors in “Simple Sector ETF Momentum Strategy”.

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