Momentum · month-end rule · Financials
12-1 Momentum on Bank of Montreal
What the play says
Latest reading: 12-1 return 34.7%
BMO 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 C$10,000 since 2005
Log scale. After trading costs, with T-bill interest while out.
The record
The play against buying and holding BMO over exactly the same dates, after costs.
| Play, since 2005 | Hold, since 2005 | Play, 5 yrs | Hold, 5 yrs | |
|---|---|---|---|---|
| Annual return | +9.7% | +11.7% | +17.1% | +17.6% |
| Total return | +640% | +999% | +119% | +124% |
| Worst drawdown | −47.9% | −62.4% | −22.5% | −27.5% |
| Volatility | 15.6% | 22.0% | 16.3% | 18.7% |
| Sharpe ratio | 0.56 | 0.53 | 0.82 | 0.76 |
| Time invested | 76% | 100% | ||
| Switches per year | 0.9 | 0 |
Every call, graded
Right on 10 of 20 closed calls (50%). In calls averaged +14.1%; out calls saw BMO move +6.3% on average.
| Called | Call | Price | Until | BMO moved | Result |
|---|---|---|---|---|---|
| Aug 30, 2024 | IN | C$104.17 | now | +125.8% | open |
| Jul 31, 2024 | OUT | C$107.63 | Aug 30, 2024 | −3.2% | ✓ right |
| Jan 31, 2024 | IN | C$114.17 | Jul 31, 2024 | −5.7% | ✕ wrong |
| Oct 31, 2023 | OUT | C$93.38 | Jan 31, 2024 | +22.3% | ✕ wrong |
| Aug 31, 2023 | IN | C$102.26 | Oct 31, 2023 | −8.7% | ✕ wrong |
| Jan 31, 2023 | OUT | C$114.89 | Aug 31, 2023 | −11.0% | ✓ right |
| Dec 30, 2022 | IN | C$104.14 | Jan 31, 2023 | +10.3% | ✓ right |
| Sep 30, 2022 | OUT | C$101.67 | Dec 30, 2022 | +2.4% | ✕ wrong |
| Feb 26, 2021 | IN | C$82.65 | Sep 30, 2022 | +23.0% | ✓ right |
| Mar 31, 2020 | OUT | C$53.60 | Feb 26, 2021 | +54.2% | ✕ wrong |
| Oct 31, 2019 | IN | C$72.78 | Mar 31, 2020 | −26.4% | ✕ wrong |
| Jul 31, 2019 | OUT | C$72.99 | Oct 31, 2019 | −0.3% | ✓ 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.