Momentum · month-end rule · Energy & power
12-1 Momentum on American Electric Power
What the play says
Latest reading: 12-1 return 12.2%
AEP with the play, last two years
Shading shows the play's call from the close that triggered it.
Return from 12 months to 1 month ago
Dashed line at 0.
Growth of $10,000 since 2005
Log scale. After trading costs, with T-bill interest while out.
The record
The play against buying and holding AEP over exactly the same dates, after costs.
| Play, since 2005 | Hold, since 2005 | Play, 5 yrs | Hold, 5 yrs | |
|---|---|---|---|---|
| Annual return | +9.7% | +10.2% | +13.7% | +12.6% |
| Total return | +641% | +724% | +89% | +80% |
| Worst drawdown | −32.9% | −48.4% | −22.3% | −29.6% |
| Volatility | 16.9% | 21.0% | 17.5% | 20.1% |
| Sharpe ratio | 0.53 | 0.48 | 0.61 | 0.50 |
| Time invested | 79% | 100% | ||
| Switches per year | 0.9 | 0 |
Every call, graded
Right on 10 of 20 closed calls (50%). In calls averaged +21.8%; out calls saw AEP move +2.4% on average.
| Called | Call | Price | Until | AEP moved | Result |
|---|---|---|---|---|---|
| May 31, 2024 | IN | $83.67 | now | +50.2% | open |
| Mar 31, 2023 | OUT | $80.09 | May 31, 2024 | +4.5% | ✕ wrong |
| Nov 30, 2021 | IN | $68.34 | Mar 31, 2023 | +17.2% | ✓ right |
| Oct 29, 2021 | OUT | $70.77 | Nov 30, 2021 | −3.4% | ✓ right |
| Apr 30, 2021 | IN | $72.88 | Oct 29, 2021 | −2.9% | ✕ wrong |
| Dec 31, 2020 | OUT | $67.78 | Apr 30, 2021 | +7.5% | ✕ wrong |
| Nov 30, 2020 | IN | $69.10 | Dec 31, 2020 | −1.9% | ✕ wrong |
| Apr 30, 2020 | OUT | $65.96 | Nov 30, 2020 | +4.8% | ✕ wrong |
| Dec 31, 2018 | IN | $57.08 | Apr 30, 2020 | +15.6% | ✓ right |
| Oct 31, 2018 | OUT | $55.52 | Dec 31, 2018 | +2.8% | ✕ wrong |
| Sep 28, 2018 | IN | $53.65 | Oct 31, 2018 | +3.5% | ✓ right |
| Aug 31, 2018 | OUT | $54.29 | Sep 28, 2018 | −1.2% | ✓ right |
An in call is right when the price rose before the next call; an out call is right when it fell. The latest 12 of 21 calls shown.
How the play works
- In at month-end when the return from 12 months ago to 1 month ago is above zero.
- Out when it is zero or below.
Jegadeesh and Titman ranked thousands of stocks and bought the winners. Testing one stock against zero is time-series momentum, a related idea.
The skip-a-month form came later; their 1993 paper skipped at most a week.
The case against
Valeriy Zakamulin tested moving-average timing on up to 155 years of U.S. stock data and found no statistically significant edge in the second half of that record. The rules earned their keep in a few severe bear markets and lagged buy and hold for long stretches in between.