Best Ways to Use Momentum
There are many ways to use momentum. Some are better than others. Let us look at some of the best approaches. Stock Momentum In 2018, Dimensional Fund Advisors (DFA) issued a report on the performance of all public momentum funds from June 2003 through 2017. Only one fund had outperformed the Russell 3000 broad market benchmark. That […]
Seasonality Factor
Our first look at calendar influences was in analyzing the best time during the month to execute dual momentum trades. Studies here, here, and here show that stocks perform best early in the month. This is when institutional investors make changes to their portfolios. Prices then are most representative of their true value. Different variations of dual momentum […]
Whither Fragility? Dual Momentum GEM
Corey Hoffstein of Newfound Research recently wrote an article called, “Fragility Case Study: Dual Momentum GEM.” Corey starts out by saying my dual momentum approach is the strategy he sees implemented the most among do-it-yourself tactical investors. Corey then said several investors bemoaned that GEM kept them invested in the stock market during the last […]
Extended Backtest of Global Equities Momentum
In 2013, I created my Global Equities Momentum (GEM) model. It holds U.S. or non-U.S. stock indices when stocks are strong and uses bonds as a safe harbor when stocks are weak.When my book, Dual Momentum Investing, was published in 2014, I had Barclays bond index data back to 1973. Since one year of data is […]
Perils of Data Mining
From the time my book was published others have tried to improve upon the book’s Global Equity Momentum (GEM) model. There is nothing wrong with trying to improve on someone’s work. That is how progress is made. But if not careful, such attempts can have data mining, overfitting, and selection bias issues. Data mining is […]
Momentum Solutions for Retirement
by Matthew Richardson, JD, Ph.D. As the surge of boomer retirements continues, commentators have given new thought to what safe withdrawal rates are for retirement accounts. The topic is especially significant given two additional factors. First, retirement balances are shockingly low for boomers (Ghilarducci 2015)[1]. Second, market fundamentals do not suggest that either bonds or […]
Common Misconceptions About Momentum
Momentum is one of the most researched topics in financial market literature. A search of the SSRN database on momentum will turn up 1000 papers written over the past three years and 3000 papers in total. With so much information available, it is not surprising that many analysts have missed seeing some of the research. Their […]
Factor Zoo or Unicorn Ranch?
According to Morningstar, as of June 2016, the assets in smart beta exchange-traded products totaled $490 billion. BlackRock forecasts smart beta investing using size, value, quality, momentum, and low-volatility factors will reach $1 trillion by 2020 and $2.4 trillion by 2025. This annual growth rate of 19% is double the growth rate of the entire […]
Mistakes of Momentum Investors
Like most investors, those using momentum are often guilty of chasing performance. In fact, momentum requires that we do this. But it should be done in a disciplined and systematic way. Performance chasing should not be due to myopia, irrational loss aversion, or other psychological biases. Behavioral Challenges It is not always easy adhering to a disciplined […]
Book Review of Quantitative Momentum
I have been looking forward to Jack and Wes’s new book. It is the only book besides my Dual Momentum Investing that relies on academic research to develop systematic momentum strategies. My book uses a macro approach of applying momentum to indices and asset classes. Wes and Jack (W&J) take the more common approach of applying momentum […]