This implies that for the canonical monthly hold the best look back would be four weeks. That certainly hasn't been my experience over the years.

The effective look-back period for momentum is proportion to the forward return in which it works, rather than equal to, though I gave examples with them being equal, I apologize.

You would intuitively expect the look-back period (for momentum) to be at least twice as long than the holding period (and more meaningful at 3-5 times longer or so) such that we are actually capturing 'part' of the momentum. (It sort of doesn't make sense if the 'part' is longer the whole).

In any case, the holding period rises in proportion to the relative strength loopback period.

Holding for 1 minute - use momentum the last 4 minutes
Holding for 1 week - use momentum the last month
Holding for 1 month - use momentum the last 4 months
Holding for 6 months - use momentum the last 24 months
Holding for 12 months - use momentum the last 4 years

- Manlobbi

Mechanical Investing FAQ

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