Momentum investing – out of sample testing

All of the previous posts used data post tech-bubble recession.  This leaves an unexplored period earlier in the dataset.  Testing from 3/96 to 3/00 gives the results below, which are similar to previous metrics.  This gives confidence that the momentum anomaly the system is designed to capture is robust (also confirming numerous studies).

RULES:

1) Filter out recession dates using RecessionAlert real-time model.

2) Fund universe: FATEX, FBTTX, FDXAX, FEIRX, FLSTX, IBB, IYR, IYE, IYW.

3) Fund selection: highest 52 week ROC, single position.

4) Exit using simple breadth condition or 6x ATR profit stops.

RESULTS:

Annual return 27%, Max. DD 12%, Sharpe 1.5

blog figs

Ticker Trade Date Price Ex. date Ex. Price % chg
FEIRX Long 6/28/1996 9.79 9/13/1996 9.86 0.72%
FEIRX Long 9/20/1996 9.92 11/1/1996 10.13 2.12%
FEIRX Long 11/15/1996 10.51 1/3/1997 10.7 1.81%
FEIRX Long 1/10/1997 10.86 2/7/1997 11.05 1.75%
FEIRX Long (profit) 2/21/1997 11.2 6/13/1997 12.46 11.25%
FEIRX Long 6/20/1997 12.5 7/3/1997 12.77 2.16%
FEIRX Long 7/11/1997 12.78 8/29/1997 12.73 -0.39%
FEIRX Long 9/5/1997 13.06 10/17/1997 13.23 1.30%
FEIRX Long 10/24/1997 13.17 11/7/1997 12.95 -1.67%
FEIRX Long 11/21/1997 13.26 2/6/1998 13.8 4.07%
FEIRX Long 2/13/1998 13.9 3/27/1998 14.97 7.70%
FEIRX Long 4/3/1998 15.26 4/24/1998 15.02 -1.57%
FEIRX Long 5/8/1998 15.11 7/24/1998 15.07 -0.26%
FEIRX Long 8/21/1998 14.13 10/16/1998 13.81 -2.26%
FEIRX Long 10/23/1998 14.03 12/11/1998 14.82 5.63%
FATEX Long 12/24/1998 18.25 2/5/1999 19.59 7.34%
FATEX Long 2/12/1999 19.5 6/11/1999 20.82 6.77%
FATEX Long 6/25/1999 21.75 8/6/1999 21.77 0.09%
FATEX Long 8/13/1999 22.59 9/24/1999 23.38 3.50%
FATEX Long 10/1/1999 23.43 10/29/1999 25.04 6.87%
FATEX Long 11/5/1999 26.44 12/17/1999 32.2 21.79%
FATEX Long 12/23/1999 33.88 1/7/2000 32.64 -3.66%
FATEX Open Long 1/14/2000 34.13 2/25/2000 39.32 15.21%

Notes:

1) Testing this internet bubble period on the technology fund only (FATEX) returns 37% annually!

2) All trades in 1999 have maximum gains over 10% but the exits allow most of the gain to evaporate.  Would monitoring the market state manually help, or hinder results?  Or is there a better exit trigger than the crude one I am using?

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