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SACEMS Portfolio-Asset Addition Testing

June 16, 2021 • Posted in Momentum Investing, Strategic Allocation

Does adding an exchange-traded fund (ETF) or note (ETN) to the Simple Asset Class ETF Momentum Strategy (SACEMS) boost performance via consideration of more trending/diversifying options? To investigate, we add the following 24 ETF/ETN asset class proxies one at a time to the base set and measure effects on the Top 1, equally weighted (EW) Top 2 and EW Top 3 SACEMS portfolios:

AlphaClone Alternative Alpha (ALFA)
JPMorgan Alerian MLP Index (AMJ)
VanEck Vectors BDC Income (BIZD)
Vanguard Total Bond Market (BND)
SPDR Barclays International Treasury Bond (BWX)
iShares MSCI Emerging Markets (EEM)
iShares MSCI Frontier 100 (FM)
First Trust US IPO Index (FPX)
iShares iBoxx High-Yield Corporate Bond (HYG)
iShares 7-10 Year Treasury Bond (IEF)
iShares Latin America 40 (ILF)
iShares National Muni Bond ETF (MUB)
Invesco Closed-End Fund Income Composite (PCEF)
Invesco Global Listed Private Equity (PSP)
IQ Hedge Multi-Strategy Tracker (QAI)
Invesco QQQ Trust (QQQ)
SPDR Dow Jones International Real Estate (RWX)
ProShares UltraShort S&P 500 (SDS)
iShares Short Treasury Bond (SHV)
iShares TIPS Bond (TIP)
United States Oil (USO)
Invesco DB US Dollar Index Bullish Fund (UUP)
ProShares VIX Short-Term Futures (VIXY)
ProShares VIX Mid-Term Futures (VIXM)

We focus on gross compound annual growth rate (CAGR) and gross maximum drawdown (MaxDD) as key performance statistics, ignoring monthly reformation costs. Using end-of-month, dividend-adjusted returns for all assets as available during February 2006 through May 2021, we find that: (more…)

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