Momentum Strategies for the ETF-Based Portfolios

20 Pages Posted: 14 Nov 2018 Last revised: 24 Apr 2019

See all articles by Daniel Nadler

Daniel Nadler

Kensho Technologies; Harvard University

Anatoly B. Schmidt

Kensho Technologies; Financial Risk and Engineering, NYU School of Engineering

Date Written: April 22, 2019

Abstract

We compared performance of past ‘winners’ and past ‘losers’ over the look-ahead period of one month for various portfolios that consist of the US ETFs and the holdings of the US equity Select Sector SPDRs in 2007 – 2017 and 2011 - 2017. Namely, we verified the conventional pattern described in the literature according to which there is mean reversion (i.e. past losers outperform past winners in near future) for short past periods and persistent momentum (i.e. past winners outperform past losers in near future) for longer past periods. We also compared performance of the momentum-based strategies with that of the equal-weight benchmark portfolios (EWBPs). We found that performance of the momentum strategies depends on portfolio holdings and whether the bear market of 2008 is included in the data sample. The conventional momentum pattern was statistically significant only for a multi-asset ETF portfolio in both 2007-2017 and 2011 -2017, and for the proxies of the SPDR S&P500 ETF and the Industrials Select Sector SPDR ETF in 2011 – 2017. However, we found other, sector-specific momentum patterns that may be explored for arbitraging past winners and past losers of the equity sector ETF holdings between themselves and/or with their EWBPs.

Keywords: Momentum Strategies, Portfolio Management, ETFs

JEL Classification: G11

Suggested Citation

Nadler, Daniel and Schmidt, Anatoly B., Momentum Strategies for the ETF-Based Portfolios (April 22, 2019). Available at SSRN: https://ssrn.com/abstract=3269475 or http://dx.doi.org/10.2139/ssrn.3269475

Daniel Nadler

Kensho Technologies ( email )

20 University Road
Cambridge, MA 02138
United States

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

Anatoly B. Schmidt (Contact Author)

Kensho Technologies ( email )

World Trade Center, Suite 46J
NYC, NY 10007
United States

Financial Risk and Engineering, NYU School of Engineering

NY
United States

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