Momentum · month-end rule · Market indexes
12-1 Momentum on Nasdaq-100 index
What the play says
Latest reading: 12-1 return 19.4%
Nasdaq-100 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 Nasdaq-100 over exactly the same dates, after costs.
| Play, since 2005 | Hold, since 2005 | Play, 5 yrs | Hold, 5 yrs | |
|---|---|---|---|---|
| Annual return | +13.4% | +14.4% | +14.5% | +14.8% |
| Total return | +1,442% | +1,768% | +96% | +99% |
| Worst drawdown | −29.0% | −53.7% | −29.0% | −35.6% |
| Volatility | 18.5% | 22.0% | 19.8% | 23.2% |
| Sharpe ratio | 0.68 | 0.64 | 0.59 | 0.55 |
| Time invested | 85% | 100% | ||
| Switches per year | 1.0 | 0 |
Every call, graded
Right on 13 of 22 closed calls (59%). In calls averaged +21.2%; out calls saw Nasdaq-100 move +2.3% on average.
| Called | Call | Price | Until | Nasdaq-100 moved | Result |
|---|---|---|---|---|---|
| Apr 28, 2023 | IN | 13,246 | now | +126.1% | open |
| May 31, 2022 | OUT | 12,642 | Apr 28, 2023 | +4.8% | ✕ wrong |
| Feb 28, 2019 | IN | 7,097.53 | May 31, 2022 | +78.1% | ✓ right |
| Jan 31, 2019 | OUT | 6,906.84 | Feb 28, 2019 | +2.8% | ✕ wrong |
| Aug 31, 2016 | IN | 4,771.05 | Jan 31, 2019 | +44.8% | ✓ right |
| Jul 29, 2016 | OUT | 4,730.23 | Aug 31, 2016 | +0.9% | ✕ wrong |
| Jun 30, 2016 | IN | 4,417.70 | Jul 29, 2016 | +7.1% | ✓ right |
| May 31, 2016 | OUT | 4,523.89 | Jun 30, 2016 | −2.3% | ✓ right |
| Apr 29, 2016 | IN | 4,341.30 | May 31, 2016 | +4.2% | ✓ right |
| Feb 29, 2016 | OUT | 4,201.12 | Apr 29, 2016 | +3.3% | ✕ wrong |
| Apr 30, 2013 | IN | 2,887.44 | Feb 29, 2016 | +45.5% | ✓ right |
| Mar 28, 2013 | OUT | 2,818.69 | Apr 30, 2013 | +2.4% | ✕ 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 23 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.