Momentum · month-end rule · Market indexes
12-1 Momentum on S&P 500 index
What the play says
Latest reading: 12-1 return 14.9%
S&P 500 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 S&P 500 over exactly the same dates, after costs.
| Play, since 2005 | Hold, since 2005 | Play, 5 yrs | Hold, 5 yrs | |
|---|---|---|---|---|
| Annual return | +8.3% | +9.0% | +13.0% | +12.4% |
| Total return | +471% | +549% | +83% | +79% |
| Worst drawdown | −33.9% | −56.8% | −18.9% | −25.4% |
| Volatility | 14.8% | 19.0% | 14.2% | 17.0% |
| Sharpe ratio | 0.50 | 0.46 | 0.66 | 0.55 |
| Time invested | 82% | 100% | ||
| Switches per year | 1.0 | 0 |
Every call, graded
Right on 12 of 22 closed calls (55%). In calls averaged +11.4%; out calls saw S&P 500 move +2.0% on average.
| Called | Call | Price | Until | S&P 500 moved | Result |
|---|---|---|---|---|---|
| May 31, 2023 | IN | 4,179.83 | now | +86.7% | open |
| May 31, 2022 | OUT | 4,132.15 | May 31, 2023 | +1.2% | ✕ wrong |
| May 29, 2020 | IN | 3,044.31 | May 31, 2022 | +35.7% | ✓ right |
| Apr 30, 2020 | OUT | 2,912.43 | May 29, 2020 | +4.5% | ✕ wrong |
| Mar 29, 2019 | IN | 2,834.40 | Apr 30, 2020 | +2.8% | ✓ right |
| Jan 31, 2019 | OUT | 2,704.10 | Mar 29, 2019 | +4.8% | ✕ wrong |
| Aug 31, 2016 | IN | 2,170.95 | Jan 31, 2019 | +24.6% | ✓ right |
| Jul 29, 2016 | OUT | 2,173.60 | Aug 31, 2016 | −0.1% | ✓ right |
| Jun 30, 2016 | IN | 2,098.86 | Jul 29, 2016 | +3.6% | ✓ right |
| Feb 29, 2016 | OUT | 1,932.23 | Jun 30, 2016 | +8.6% | ✕ wrong |
| Nov 30, 2015 | IN | 2,080.41 | Feb 29, 2016 | −7.1% | ✕ wrong |
| Sep 30, 2015 | OUT | 1,920.03 | Nov 30, 2015 | +8.4% | ✕ 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.