Monthly Momentum In SPY and EEM

Last Updated on October 26, 2022 by Oddmund Groette

There are many ways to utilize monthly momentum in SPY and EEM:

I have over the last week written two articles about momentum:

The third looks at rotating between the two most popular stock ETFs: SPY and EEM.

The assumptions are like this:

  • It’s based on monthly data in the ETFs SPY and EEM.
  • Every month rank them based on last month’s performance and go long the best performing.
  • Hold for one month and repeat (or continue being long the same instrument).

Pretty simple, and the equity curve looks like this:

Monthly momentum in SPY and EEM
Momentum strategy in SPY and EEM.

The strategy outperforms buy and hold for both ETFs, but the drawdown is bigger compared to momentum in SPY/TLT. Bonds lower the drawdowns a lot.

I have tested different lookback periods and holding times, but it seems monthly performs the best.

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