Momentum · month-end rule · Financials
12-1 Momentum on Royal Bank of Canada
What the play says
Latest reading: 12-1 return 42.0%
RY 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 RY over exactly the same dates, after costs.
| Play, since 2005 | Hold, since 2005 | Play, 5 yrs | Hold, 5 yrs | |
|---|---|---|---|---|
| Annual return | +9.7% | +14.8% | +13.8% | +21.0% |
| Total return | +645% | +1,887% | +90% | +158% |
| Worst drawdown | −35.6% | −54.0% | −28.1% | −21.2% |
| Volatility | 15.1% | 20.9% | 14.8% | 15.4% |
| Sharpe ratio | 0.58 | 0.68 | 0.69 | 1.07 |
| Time invested | 78% | 100% | ||
| Switches per year | 1.4 | 0 |
Every call, graded
Right on 12 of 30 closed calls (40%). In calls averaged +11.2%; out calls saw RY move +7.3% on average.
| Called | Call | Price | Until | RY moved | Result |
|---|---|---|---|---|---|
| Mar 28, 2024 | IN | C$125.97 | now | +120.1% | open |
| Feb 29, 2024 | OUT | C$121.53 | Mar 28, 2024 | +3.7% | ✕ wrong |
| Dec 29, 2023 | IN | C$122.28 | Feb 29, 2024 | −0.6% | ✕ wrong |
| Oct 31, 2023 | OUT | C$101.08 | Dec 29, 2023 | +21.0% | ✕ wrong |
| Feb 28, 2023 | IN | C$122.40 | Oct 31, 2023 | −17.4% | ✕ wrong |
| Jan 31, 2023 | OUT | C$120.29 | Feb 28, 2023 | +1.7% | ✕ wrong |
| Nov 30, 2022 | IN | C$117.04 | Jan 31, 2023 | +2.8% | ✓ right |
| Oct 31, 2022 | OUT | C$110.27 | Nov 30, 2022 | +6.1% | ✕ wrong |
| Sep 30, 2022 | IN | C$107.69 | Oct 31, 2022 | +2.4% | ✓ right |
| Aug 31, 2022 | OUT | C$105.75 | Sep 30, 2022 | +1.8% | ✕ wrong |
| Dec 31, 2020 | IN | C$84.97 | Aug 31, 2022 | +24.4% | ✓ right |
| Apr 30, 2020 | OUT | C$68.02 | Dec 31, 2020 | +24.9% | ✕ 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 31 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.