212 Years of Price Momentum (The World’s Longest Backtest: 1801-2012)
- Geczy and Samonov
- A version of the paper can be found here.
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We assemble a dataset of U.S. security prices between 1801 and 1926, and create an out-of-sample test of the price momentum strategy, discovered in the post-1927 data. The pre-1927 momentum profits remain positive and statistically significant. Additional time series data strengthens the evidence that momentum is dynamically exposed to market beta, conditional on the sign and duration of the tailing market state. In the beginning of each market state, momentum’s beta is opposite from the new market direction, generating a negative contribution to momentum profits around market turning points. A dynamically hedged momentum strategy significantly outperforms the un-hedged strategy.
GFD, CRSP, ICF, ICPSR, 1801-2012
The momentum long/short has 3 negative decades out of 20. Not bad.
Some serious chart porn:
- Buy winners!
- Be ready for a wild ride, but if you believe in empirical-based analysis…momentum is the most persistent trading factor around (alongside value)
hattip to Gary Antonacci who posted this last night
Who is out there trading momentum? Any luck?