The exhibits of this page are of proof-of-concept tests that were run in order to explore the efficacy of a modified momentum strategy that avoids losses during bear markets and panics by resorting to cash whenever recent monthly returns have been exceeded by the returns on cash. All data are “hypothetical” but have been subjected to vigorous out-of-sample testing and other analyses that refute the idea that the results could easily be due to chance. Of interest: this discussion of hypothetical vs. real-money; and, the working paper that is made available on the Home page which explains the technical details. Strategy parameters were optimized over a 10-yr trailing period. Where equal weighting is indicated, as opposed to capitalization weighting, that brought about the associated sky-high benchmark returns.



Momentum & French's Hi E/P Decile (Dividends Reinvested; Cash Resort)

All Data[Audit]?
Click-drag to zoom in; double-click to zoom out; shift-click-drag to pan.

Performance Summary

This portfolio is dynamically managed, holding either cash or long positions in the following: e-p_Hi_10.

Scheme Total
Trades/Year
Annualized Return (%)? Sharpe Ratio?
Traded Portfolio 4 22.0 1.12
Benchmark minimal 18.2 0.58

The raw data are from Professor Kenneth R. French's website. Cash is the resort here when the trailing rate of return on e-p_Hi_10 falls below that of cash, e-p_Hi_10 being the equal-weight decile of the highest earnings-to-price ratios.

Momentum & Shiller's S&P Composite— from the 19th Century (Dividends Reinvested; Cash Resort)

All Data[Audit]?
Click-drag to zoom in; double-click to zoom out; shift-click-drag to pan.

Performance Summary

This portfolio is dynamically managed, holding either cash or long positions in the following: S&P_Composite.

Scheme Total
Trades/Year
Annualized Return (%)? Sharpe Ratio?
Traded Portfolio 3 10.7 0.62
Benchmark minimal 9.1 0.32

The raw data are from Professor Robert J. Shiller's website. With the strategy as pursued here there is a resort to cash when the trailing rate of return on the composite falls below that of cash. The composite is capitalization-weighted.

Momentum & French's 10 Industrial Groups (Dividends Reinvested; Cash Resort)

All Data[Audit]?
Click-drag to zoom in; double-click to zoom out; shift-click-drag to pan.

Performance Summary

This portfolio is dynamically managed, holding either cash or long positions in the following: indu10_Durbl, indu10_Enrgy, indu10_HiTec, indu10_Hlth_, indu10_Manuf, indu10_NoDur, indu10_Other, indu10_Shops, indu10_Telcm, and indu10_Utils.

Scheme Total
Trades/Year
Annualized Return (%)? Sharpe Ratio?
Traded Portfolio 35 18.6 0.79
Benchmark minimal 14.3 0.47

The raw data are from Professor Kenneth R. French's website. Cash is resorted to here when the trailing rate of return on an industry group falls below that of cash. There are ten equally-weighted industry groups in all.