Momentum · month-end rule · Market indexes
12-1 Momentum on Dow Jones Industrial Average
What the play says
Latest reading: 12-1 return 14.6%
Dow 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 Dow over exactly the same dates, after costs.
| Play, since 2005 | Hold, since 2005 | Play, 5 yrs | Hold, 5 yrs | |
|---|---|---|---|---|
| Annual return | +6.6% | +7.5% | +7.5% | +8.2% |
| Total return | +300% | +381% | +43% | +48% |
| Worst drawdown | −37.1% | −53.8% | −16.4% | −21.9% |
| Volatility | 13.9% | 17.9% | 12.8% | 14.8% |
| Sharpe ratio | 0.40 | 0.39 | 0.33 | 0.35 |
| Time invested | 80% | 100% | ||
| Switches per year | 1.2 | 0 |
Every call, graded
Right on 17 of 28 closed calls (61%). In calls averaged +8.7%; out calls saw Dow move +2.1% on average.
| Called | Call | Price | Until | Dow moved | Result |
|---|---|---|---|---|---|
| Dec 29, 2023 | IN | 37,690 | now | +37.0% | open |
| Nov 30, 2023 | OUT | 35,951 | Dec 29, 2023 | +4.8% | ✕ wrong |
| Apr 28, 2023 | IN | 34,098 | Nov 30, 2023 | +5.4% | ✓ right |
| Mar 31, 2023 | OUT | 33,274 | Apr 28, 2023 | +2.5% | ✕ wrong |
| Feb 28, 2023 | IN | 32,657 | Mar 31, 2023 | +1.9% | ✓ right |
| May 31, 2022 | OUT | 32,990 | Feb 28, 2023 | −1.0% | ✓ right |
| Dec 31, 2020 | IN | 30,606 | May 31, 2022 | +7.8% | ✓ right |
| Nov 30, 2020 | OUT | 29,639 | Dec 31, 2020 | +3.3% | ✕ wrong |
| Aug 31, 2020 | IN | 28,430 | Nov 30, 2020 | +4.3% | ✓ right |
| Mar 31, 2020 | OUT | 21,917 | Aug 31, 2020 | +29.7% | ✕ wrong |
| Oct 31, 2019 | IN | 27,046 | Mar 31, 2020 | −19.0% | ✕ wrong |
| Sep 30, 2019 | OUT | 26,917 | Oct 31, 2019 | +0.5% | ✕ wrong |
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 29 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.