The World’S Longest Multi-Asset Momentum Investing Backtest!

Two quick points:

1) When implementing momentum every bit a strategy always, e'er hold inwards heed the trivial "Trend, Friend, Bend, End" rhyme. If the momo mamas outset moving toward the exits the resulting countermoves tin endure disastrous for folks nevertheless on the trip the low-cal fantastic floor.

2) Those equity databases going dorsum 200 years direct hold a whole lot of problems starting amongst survivorship bias, modest sample sizes, reliance on financials (banks), i.e. no wooden turnpike companies, failed canals... etc. etc.
In his monumental “COMMON-STOCK INDEXES 1871-1937″ Mr. Cowles is quite explicit every bit to the reasons he in addition to the Commission didn’t become farther dorsum than 1871. (pg. 4) 506 page PDF hosted at Yale.
I've mentioned "Common Stock Indexes..." in addition to the Cowles Commission a few times, unremarkably when referring to i of the industrial companies, New York Guano merely also because of the Cowles Foundation's connection to some Nobelists:

Robert Shiller
Tjalling Koopmans
Kenneth Arrow
Gerard Debreu
James Tobin
 Franco Modigliani
Herbert Simon
Lawrence Klein
Trygve Haavelmo
Harry Markowitz

Not every bit prolific every bit Cambridge's Cavendish Lab, 29 Laureates, mainly inwards physics, at final count merely thence the econ version isn't i of the master copy Nobels in addition to hasn't been or thence every bit long.

From Alpha Architect:

As evidenced past times the ikon below, involvement inwards momentum interrogation has taken off since the master copy 1993 Jegadeesh in addition to Titman paper:

 

Source: “Two Centuries of Multi-Asset Momentum (Equities, Bonds, Currencies, Commodities, Sectors in addition to Stocks)” https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2607730

Most of the interrogation on momentum is repetitive in addition to reaks of information torture, merely Geczy in addition to Samanov direct hold been conducting some fascinating out of sample interrogation on the topic.

We direct hold discussed prior interrogation past times Gezcy in addition to Samonov here on U.S. equity momentum over 200 years of data. The testify is like to the academic finding that, on average, intermediate-term winning stocks proceed winning, piece intermediate-term losing stocks proceed losing–otherwise known every bit a continuation of momentum for stocks.⁽¹⁾

But studying 200+ years of equity information was non plenty for Gezcy in addition to Samanov — they direct hold a novel newspaper titled, “Two Centuries of Multi-Asset Momentum (Equities, Bonds, Currencies, Commodities, Sectors, in addition to Stocks).”

This newspaper builds on the master copy paper (mentioned here), merely adds (1) other property classes in addition to (2) examines time-series momentum. The newspaper also looks at how momentum performs inwards other property classes in addition to international equities. (similar to what Asness, Moskowitz, in addition to Pedersen present in, “Value in addition to Momentum Everywhere:” the momentum premia exists inwards international equities every bit good every bit other property classes.

To follow-up on the “Value in addition to Momentum Everywhere” study, this newspaper digs into how momentum industrial plant both inside in addition to across property classes, over a longer time-period. The ikon below gives a graphical depiction of the release of property classes studied inwards the newspaper across time.

 

Source: “Two Centuries of Multi-Asset Momentum (Equities, Bonds, Currencies, Commodities, Sectors in addition to Stocks)” https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2607730

Below nosotros dig into the results from the paper.

The Results

First, the newspaper examines how momentum industrial plant inside (and across) each property class. This is done past times sorting securities into a relative “winner” in addition to a relative “loser” portfolio past times using the classic 12_2 momentum screen — this is the twelve-month momentum of each safety excluding the final ii months (so ten months of returns). Within each universe, the overstep 3rd are deemed “winners” in addition to the bottom 3rd are deemed “losers.”

The tabular array below examines the returns for each property cast to the Winner, Loser, in addition to Winner minus Loser portfolios....MORE