Momentum · month-end rule · Financials
12-1 Momentum on Sun Life Financial
What the play says
Latest reading: 12-1 return 35.5%
SLF 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 SLF over exactly the same dates, after costs.
| Play, since 2005 | Hold, since 2005 | Play, 5 yrs | Hold, 5 yrs | |
|---|---|---|---|---|
| Annual return | +7.2% | +9.1% | +11.2% | +15.0% |
| Total return | +350% | +554% | +70% | +100% |
| Worst drawdown | −46.0% | −71.5% | −23.0% | −24.5% |
| Volatility | 17.7% | 26.6% | 16.1% | 17.1% |
| Sharpe ratio | 0.38 | 0.39 | 0.51 | 0.68 |
| Time invested | 77% | 100% | ||
| Switches per year | 0.9 | 0 |
Every call, graded
Right on 9 of 20 closed calls (45%). In calls averaged +11.1%; out calls saw SLF move +5.4% on average.
| Called | Call | Price | Until | SLF moved | Result |
|---|---|---|---|---|---|
| Apr 28, 2023 | IN | C$57.29 | now | +93.5% | open |
| Mar 31, 2023 | OUT | C$54.43 | Apr 28, 2023 | +5.3% | ✕ wrong |
| Feb 28, 2023 | IN | C$56.84 | Mar 31, 2023 | −4.2% | ✕ wrong |
| Jul 29, 2022 | OUT | C$49.54 | Feb 28, 2023 | +14.7% | ✕ wrong |
| Feb 26, 2021 | IN | C$48.68 | Jul 29, 2022 | +1.8% | ✓ right |
| Jan 29, 2021 | OUT | C$46.57 | Feb 26, 2021 | +4.5% | ✕ wrong |
| Dec 31, 2020 | IN | C$44.60 | Jan 29, 2021 | +4.4% | ✓ right |
| Apr 30, 2020 | OUT | C$36.46 | Dec 31, 2020 | +22.3% | ✕ wrong |
| Apr 30, 2019 | IN | C$40.96 | Apr 30, 2020 | −11.0% | ✕ wrong |
| Nov 30, 2018 | OUT | C$35.70 | Apr 30, 2019 | +14.7% | ✕ wrong |
| Oct 31, 2016 | IN | C$30.16 | Nov 30, 2018 | +18.4% | ✓ right |
| Sep 30, 2016 | OUT | C$28.68 | Oct 31, 2016 | +5.2% | ✕ 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 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.