Subject: Re: Statistics for Nasdaq 100 monthly Momentum Screen
I see a typo in my response. 300 to 350 days SPY>SMA all worked for a timing add-on to a base 9month lookback, and picking 1,5, or 10 all worked but #1 only had massive risk so holding on would be hard. But MDD to recover days was 1/2 the time to wait vs. the MDD to recovery of QQQ.
1. Core continuous data
Strategy CAGR Sharpe Max DD
Mom 1 33.7% 0.780 -81% only buying top 1 stock by 9 month momentum
Mom 1 timed 37.0% 0.855 -76% Same but go to cash next month if SPY<325 day SMA
Mom 5 23.8% 0.742 -69%
Mom 5 timed 23.6% 0.790 -50%
Mom 10 21.2% 0.735 -71%
Mom 10 timed 21.8% 0.813 -48%
SPY 10.5% 0.626 -55%
QQQ 10.0% 0.488 -83%
2. Worst rolling returns
Strategy Worst 1Y Worst 3Y Worst 5Y Worst 10Year period
Mom 10 timed -25.5% -4.8% 1.8% 5.1%
SPY -43.3% -14.5% -2.3% 1.2%
QQQ -67.6% -25.0% -9.4% 0.7%
worst-case 5-year and 10-year outcomes beat the market
3. Start-date sensitivity test
“first trading day of any month” test is excellent.
Strategy Avg Start CAGR Worst
Mom 1 timed 28.0% 3.8%
Mom 5 timed 18.2% 6.4%
Mom 10 timed 16.9% 7.1%
SPY 11.3% 4.1%
4. Lookback period
Top-1 best: ~18 month momentum lookback
Top-10 best: ~9 month momentum lookback
1-month holding period best
5. Profit concentration
Top winners' contribution:
Strategy Top 1% Top 5% Top 10%
Mom 10 9.4% 27.0% 39.3%
The strategy was not dependent on one giant winner.
6. Drawdown improvement from timing filter
Strategy Max DD
Mom 10 -71.6%
Mom 10 timed -48.0%
That’s a massive improvement.
But importantly:
timing did not always improve CAGR
But worst 10-year returns still beat SPY