Claim check: 12-1 momentum
“Buy last year's winners and sell last year's losers (12-1 momentum).”
What the data says
Does not hold Not supported by the data: the site's strategies behind this saying had a higher Sharpe ratio than their benchmark over the full history in 2 of 2 cases and over both the last five years and the full history in 0; the median Sharpe ratio was 0.65 against 0.47 for the benchmark (before costs). The advantage in the full history is not there in both the five-year and the full-history window, so it is not consistent.
No effect we can tell from chance, or the opposite effect.
Who says it
Jegadeesh and Titman (1993); AQR and quant Twitter promote it.
Origins are as commonly cited and were not independently verified.
How we tested it
We do not rebuild this test; we read the site's two momentum rotation strategies (cross-sectional momentum, asset-class rotation) and compare each with its benchmark over the last five years and over the full history. The claim holds only if the Sharpe ratio is higher in both windows. The benchmark is the S&P 500 buy-and-hold shown on the strategy pages, which is a tough yardstick for a ten-market rotation.
Results
| Strategy | Market | Sharpe, 5 years | Benchmark, 5 years | Sharpe, full | Benchmark, full | CAGR, full | Benchmark, full | Max DD, full | Benchmark, full | Reading |
|---|---|---|---|---|---|---|---|---|---|---|
| CS-01 Cross-Sectional Momentum | CS-UNIV | 0.76 | 1.11 | 0.70 | 0.47 | +8.4% | +5.3% | -20% | -38% | Full history only |
| MOM-04 Asset Class Rotation | ROTATION | 0.68 | 1.11 | 0.61 | 0.47 | +8.7% | +5.3% | -31% | -38% | Full history only |
Sharpe ratio minus benchmark, full history · Benchmark = the buy-and-hold shown on the strategy pages.
Stability across the two halves of history
A saying that only works in one half of the history is not much of a rule. Each row shows the effect in the full history, the first half and the second half; green means the claimed effect was present.
| Market | Sharpe gap, 5 years | Sharpe gap, full history |
|---|---|---|
| Cross-Sectional Momentum · CS-UNIV | -0.36 | +0.23 |
| Asset Class Rotation · ROTATION | -0.43 | +0.13 |
The honest caveat
Ten assets is a small universe, much smaller than the stock cross-sections used in academic work.
Descriptive statistics from historical data, before costs. Not a forecast and not investment advice.
Questions
Buy last year's winners and sell last year's losers (12-1 momentum).
Not supported by the data: the site's strategies behind this saying had a higher Sharpe ratio than their benchmark over the full history in 2 of 2 cases and over both the last five years and the full history in 0; the median Sharpe ratio was 0.65 against 0.47 for the benchmark (before costs). The advantage in the full history is not there in both the five-year and the full-history window, so it is not consistent.
How was this claim tested?
We do not rebuild this test; we read the site's two momentum rotation strategies (cross-sectional momentum, asset-class rotation) and compare each with its benchmark over the last five years and over the full history. The claim holds only if the Sharpe ratio is higher in both windows. The benchmark is the S&P 500 buy-and-hold shown on the strategy pages, which is a tough yardstick for a ten-market rotation.