Last Updated on November 17, 2020 by Oddmund Groette
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:
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.
Disclosure: I am not a financial advisor. Please do your own due diligence and investment research or consult a financial professional. All articles are my opinion – they are not suggestions to buy or sell any securities.