37 Pages Posted: 19 Jul 2017
Date Written: July 14, 2017
VAA (Vigilant Asset Allocation) is a dual-momentum based investment strategy with a vigorous crash protection and a fast momentum filter. Dual momentum combines absolute (trendfollowing) and relative (strength) momentum. Compared to the traditional dual momentum approaches, we have replaced the usual crash protection through trendfollowing on the asset level by our breadth momentum on the universe level instead. As a result, the VAA strategy is on average often more than 50% out of the market. We show, however, that the resulting momentum strategy is by no means sluggish. By using large and small universes with US and global ETF-like monthly data starting 1925 and 1969 respectively, we arrive out-of-sample at annual returns above 10% with max drawdowns below 15% for each of these four universes.
Keywords: Breadth Momentum, Drawdown, Protective Momentum, Dual Momentum, Absolute and Relative Momentum, Crash Protection, Backtesting, Datasnooping, 60/40, VAA, PAA, TAA
JEL Classification: C00, C10, C22, G00, G11, G10, G14
Suggested Citation: Suggested Citation
Keller, Wouter J. and Keuning, Jan Willem, Breadth Momentum and Vigilant Asset Allocation (VAA): Winning More by Losing Less (July 14, 2017). Available at SSRN: https://ssrn.com/abstract=3002624