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Expanded/Modified SACEMS Asset Universe?

February 4, 2022 • Posted in Strategic Allocation

A subscriber suggested expanding and modifying the asset universe for the Simple Asset Class ETF Momentum Strategy (SACEMS) to consist of the following exchange-traded funds (ETF):

  • SPDR Portfolio S&P 500 Growth (SPYG)
  • SPDR Portfolio S&P 500 Value (SPYV)
  • iShares Russell 2000 Growth (IWO)
  • iShares Russell 2000 Value (IWN)
  • Invesco QQQ Trust (QQQ)
  • iShares MSCI EAFE Index (EFA)
  • iShares MSCI Emerging Markets Index (EEM)
  • iShares Barclays 20+ Year Treasury Bond (TLT)
  • iShares Core U.S. Aggregate Bond (AGG)
  • iShares U.S. Real Estate ETF (IYR)
  • SPDR Gold Shares (GLD)
  • Invesco DB Commodity Index Tracking (DBC)
  • 3-month Treasury bills (Cash)

To investigate attractiveness of this alternative, we first look at compound annual growth rates (CAGR) and maximum drawdowns (MaxDD) for the expanded universe across SACEMS momentum measurement (lookback) intervals ranging from 1 to 12 months to identify effective lookback intervals. We then compare annual performance statistics of the Top 1, equal-weighted (EW) Top 2, EW Top 3 and EW Top 4 portfolios for the expanded and baseline asset universes with the SACEMS baseline lookback interval. Using monthly dividend-adjusted returns for the expanded asset universe during February 2006 (limited by DBC) through December 2021 and monthly returns for baseline SACEMS over the same period, we find that: (more…)

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