SPY 30-day/9-month SMA Crossover Test

A subscriber requested testing of a dual simple moving average (SMA) crossover strategy that holds SPDR S&P 500 (SPY) when its 30-day SMA (SMA30d, using 30 trading days) is above its 9-month SMA (SMA9m) and otherwise holds cash with yield that of 3-month U.S. Treasury bills (T-bills). To investigate, we calculate SPY SMA30d and SMA9m at the end of each month over the history of SPY and hold SPY or cash the next month as specified. As benchmarks, we consider buying and holding SPY and a strategy that is each month in SPY (cash) when SPY is above (below) its SMA9m at the end of the prior month. We focus on compound annual growth rate (CAGR) and maximum drawdown (MaxDD) as key performance metrics. We also perform some sensitivity testing on the choices of 30-day and 9-month SMAs. Using daily dividend-adjusted prices for SPY and monthly T-bill yields during January 1993 through September 2020, we find that: (more…)