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Extended Simple Momentum Strategy Test of TSP Funds/Proxies

August 9, 2017 • Posted in Momentum Investing, Strategic Allocation

A subscriber asked about extending “Simple Momentum Strategy Applied to TSP Funds” back in time to 1988. That test employs the following five funds, all available to U.S. federal government employees via the Thrift Savings Plan (TSP) as of January 2001:

G Fund: Government Securities Investment Fund (G)
F Fund: Fixed Income Index Investment Fund (F)
C Fund: Common Stock Index Investment Fund (C)
S Fund: Small Cap Stock Index Investment Fund (S)
I Fund: International Stock Index Investment Fund (I)

S Fund and I Fund data limit the combined sample period. To extend the test back to first availability of G Fund, F Fund and C Fund data in February 1988, we use Vanguard Small Cap Index Investors Fund (NAESX) as a proxy for the S Fund and Vanguard International Value Investors Fund (VTRIX) as a proxy for the I Fund prior to 2001. We first perform a sensitivity test of fund ranking (lookback) intervals ranging from one to 12 months on the following monthly reformed portfolios: the winner fund (Top 1); an equally weighting of the top two funds (EW top 2); an equally weighting of the Top 3 funds (EW Top 3); and, an equal weighting of all five funds (EW All). We then perform detailed tests using a representative lookback interval. Using monthly returns for the five TSP funds as available during February 1988 through June 2017 (351 months) and monthly returns for NAESX and VTRIX during February 1988 through December 2000, we find that:


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