Momentum · month-end rule · Market indexes
12-1 Momentum on S&P/TSX Composite index
What the play says
Latest reading: 12-1 return 20.8%
TSX 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 TSX over exactly the same dates, after costs.
| Play, since 2005 | Hold, since 2005 | Play, 5 yrs | Hold, 5 yrs | |
|---|---|---|---|---|
| Annual return | +6.1% | +6.5% | +11.4% | +11.8% |
| Total return | +259% | +294% | +71% | +75% |
| Worst drawdown | −37.5% | −49.8% | −17.0% | −17.6% |
| Volatility | 12.5% | 16.8% | 11.9% | 13.3% |
| Sharpe ratio | 0.39 | 0.35 | 0.65 | 0.62 |
| Time invested | 74% | 100% | ||
| Switches per year | 1.0 | 0 |
Every call, graded
Right on 9 of 22 closed calls (41%). In calls averaged +7.6%; out calls saw TSX move +1.7% on average.
| Called | Call | Price | Until | TSX moved | Result |
|---|---|---|---|---|---|
| Dec 29, 2023 | IN | 20,958 | now | +71.7% | open |
| Nov 30, 2023 | OUT | 20,236 | Dec 29, 2023 | +3.6% | ✕ wrong |
| Jun 30, 2023 | IN | 20,155 | Nov 30, 2023 | +0.4% | ✓ right |
| Jul 29, 2022 | OUT | 19,693 | Jun 30, 2023 | +2.3% | ✕ wrong |
| Dec 31, 2020 | IN | 17,433 | Jul 29, 2022 | +13.0% | ✓ right |
| Apr 30, 2020 | OUT | 14,781 | Dec 31, 2020 | +17.9% | ✕ wrong |
| Aug 30, 2019 | IN | 16,442 | Apr 30, 2020 | −10.1% | ✕ wrong |
| Jun 28, 2019 | OUT | 16,382 | Aug 30, 2019 | +0.4% | ✕ wrong |
| Feb 28, 2019 | IN | 15,999 | Jun 28, 2019 | +2.4% | ✓ right |
| Nov 30, 2018 | OUT | 15,198 | Feb 28, 2019 | +5.3% | ✕ wrong |
| May 31, 2018 | IN | 16,062 | Nov 30, 2018 | −5.4% | ✕ wrong |
| Mar 29, 2018 | OUT | 15,367 | May 31, 2018 | +4.5% | ✕ 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 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.