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Testing a 2-12 Asset Class Absolute Momentum Strategy

September 29, 2021 • Posted in Strategic Allocation

A subscriber asked about the performance of a strategy that each month has five equal-weighted positions:

We designate this strategy 2-12 Absolute. As requested, we also consider two variations that substitute Invesco DB Commodity Index Tracking Fund (DBC) for either TLT or LQD, and we compare 2-12 Absolute performance to that of a portfolio that each month allocates 50% to Simple Asset Class ETF Value Strategy (SACEVS) Best Value and 50% to Simple Asset Class ETF Momentum Strategy (SACEMS) equal-weighted (EW) Top 2. We begin tests at the end of March 2009, limited by inception of ACWI. We exclude monthly rebalancing/switching frictions for all strategies. Using monthly dividend-adjusted prices for GLD, ACWI, VNQ, TLT, LQD, DBC and SHY starting March 2009 and monthly gross returns for 50-50 SACEVS Best Value and SACEMS EW Top 2 starting April 2009, all through August 2021, we find that: (more…)

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