An earlier post analyzed DWAS, the recently introduced small-cap momentum ETF from Dorsey-Wright. This post looks at PDP, an all-cap momentum fund with a longer history (> 6 years).

Comparing daily returns:

Frictionless Fama-French data has 98% of PDP returns, on average! i.e. PDP performs 2% better (R2 = 0.92, correlation = 0.96).

Performance since launch versus SPY and Fama-French momentum* is shown below.

* average of small and big “high momentum” series from the Ken French data library.

The theoretical series (red) corrected less in 2008 and therefore ends higher. However, the return from the 2009 low is identical between PDP and FF (see table). PDP sharpe and average daily return are about 50% higher than SPY over the last 6 years.

For comparison, daily returns versus SPY are below:

The gradient of the trendline is 0.85, therefore PDP daily returns are 15% greater than SPY, on average since 2007.

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Is this small cap “value” that your analysing ?

No, this is all-cap momentum. I looked at small-cap value here: https://rrspstrategy.wordpress.com/2013/06/18/combining-value-and-momentum-ht-asness/

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Hello again, which Fama and French download files ( and columns? in the files) contain the “high momentum” series ? I see “6, 25 Portfolios Formed on Size and Momentum (2 x 3)

and “10 Portfolios Formed on Momentum” ……

Open 6 Portfolios Formed on Size and Momentum (2 x 3):

Average Value Weighted Returns — Monthly

Small Big

Low 2 High Low 2 High

192701 0.07 3.74 0.39 -0.63 0.23 0.02

Column 1: date (Jan 1927)

Column 4: small cap, high momentum monthly % return

Column 7: large cap, high momentum monthly % return

Thanks, We’ll be inputting the data into our model for use in a possible upcoming article in this series … http://seekingalpha.com/article/1725902-market-map-model-1-tactical-asset-allocation-using-low-expense-index-etfs