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SACEVS and SACEMS from a European Perspective

Posted in Currency Trading, Strategic Allocation

A European subscriber asked about the effect of the dollar-euro exchange rate on the Simple Asset Class ETF Value Strategy (SACEVS) and the Simple Asset Class ETF Momentum Strategy (SACEMS). To investigate, we each month adjust the gross returns for these strategies for the change in the dollar-euro exchange rate that month. We consider all strategy variations: Best Value and Weighted for SACEVS; and, Top 1, equally weighted (EW) Top 2 and EW Top 3 for SACEVS. We focus on SACEVS Best Value and SACEMS EW Top 3. We consider effects on four gross performance metrics: average monthly return; standard deviation of monthly returns; compound annual growth rate (CAGR); and, maximum drawdown (MaxDD). Using monthly returns for the strategies and monthly changes in the dollar-euro exchange rate since August 2002 for SACEVS and since August 2006 for SACEMS, both through April 2018, we find that:

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