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Absolute Momentum: A Simple Rule-Based Strategy and Universal Trend-Following Overlay

Gary Antonacci

Portfolio Management Consultants

April 2013

There is a considerable body of research on relative strength price momentum but much less on absolute momentum, also known as time series momentum. In this paper, we explore the practical side of absolute momentum. We first explore its sole parameter - the formation, or look back, period. We then examine the reward, risk, and correlation characteristics of absolute momentum applied to stocks, bonds, and real assets. We finally apply absolute momentum to a 60/40 stock/bond portfolio and a simple risk parity portfolio. We show that absolute momentum can effectively identify regime change and add significant value as an easy-to-implement, rule-based approach with many potential uses as both a stand-alone program and trend-following overlay.

Number of Pages in PDF File: 33

Keywords: momentum, momentum investing, tactical asset allocation, technical analysis, trading rules

JEL Classification: C10, C22, G10, G11, G14

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Date posted: April 4, 2013 ; Last revised: June 13, 2015

Suggested Citation

Antonacci, Gary, Absolute Momentum: A Simple Rule-Based Strategy and Universal Trend-Following Overlay (April 2013). Available at SSRN: https://ssrn.com/abstract=2244633 or http://dx.doi.org/10.2139/ssrn.2244633

Contact Information

Gary Antonacci (Contact Author)
Portfolio Management Consultants ( email )
#543-1755 Robson Street
Vancouver, British Columbia V6G3B7
HOME PAGE: http://optimalmomentum.com
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References:  23
Citations:  1
Footnotes:  13