Gary Antonacci's Global Equity Momentum

Models
1

Hi all,

has anyone ever tried to replicate Gary Antonacci’s Global Equity Momentum strategy in P123?
Had a quick search in the Forum but couldnt find any threat about it.
If anyone else is looking or has been looking at this as well, I would love to discuss.

best,
Andreas

2

Hi Andreas,
I am also interested in replicating Antonacci’s Global Equity Momentum, but could not find any guidance.
On the other hand I found out a useful website ( https://www.portfoliovisualizer.com ) where you can test GEM model and other TAA, for free.
If someone in the forum can give guidance on how to implement GEM in P123, thanks in advance!
Alberto

3

Can someone break down the rules to dual momentum?

In my 5 minutes of searching, it appears to be a combination of a relative and absolute momentum signal.

But I don’t really see the difference because even if absolute momentum could be measured, it must still ranked ‘relative’ to other momentums in order to force some kind of investment decision.

What am I missing?

4

The rules work as follows:

  1. In the equity asset class you have two available choices, US equities and ex-US equities. As proxies use VTI and VEU (or VXUS), respectively.
  2. At the start of each month, perform a 1-year look back for absolute and relative performance.
  3. If either investment has outperformed cash (SHY) over the 1-year look-back (the absolute measure), invest in the security with the strongest 1-year relative performance.
  4. If neither investment has outperformed cash, invest in the aggregate bond index (AGG or BND).

Notes:

  1. I’ve seen some conflicting information in Gary’s research about whether one should invest in cash (SHY) or aggregate bonds if neither equity market satisfies the absolute and relative criteria. But in his book he recommends aggregate bonds so I’m following that advice here.
  2. In his original white paper he also revealed a composite index (4 asset classes: Equities, Credit, Real Estate and “Stress”) using the same momentum principles across all 4 asset classes, with very good absolute and relative performance.
  3. Antonacci authored a book on the subject, Dual Momentum.
  4. He also has a website with lots more information, www.optimalmomentum.com

Hope that’s helpful,
Ed

5

Thanks, Ed,

Just for clarity, how is absolute momentum different than relative momentum?

As far as I understand, absolute momentum (e.g., one year price RoC) used in a P123 ranking system would automatically be treated as a relative measure. I am having trouble understanding how “absolute” is being used herein.

Thanks,
David

6

Hi David,

The difference is that an investment security can have superior relative performance and yet have negative absolute performance. I sense you automatically filter for negative absolute performance, but for those who don’t (including many published relative-performance “strategies”), Dual Momentum offers an additional filter.

Best,
Ed

7

I don’t have the skill to program a port, but here’s some more info about the GEM strategy, including a live spreadsheet showing the current holding.
https://indexswingtrader.blogspot.com/2016/10/prospecting-dual-momentum-with-gem.html

They also created a modified version of GEM with even better performance.
https://indexswingtrader.blogspot.com/2017/07/breadth-momentum-and-vigilant-asset.html

8

I think I see my confusion. Dual momentum is basically a ranking system of relative momentum overlaid on an absolute momentum filter.

I am not inclined to replicate GEM. But I am intrigued how I may be able t apply dual momentum’s core intuitions to stock picking.

Am I justified in summarizing dual momentum as such?

  1. Orthogonal ranking - performance relative to others.
  2. Longitudinal ranking - performance relative to self.
9

Hi David,

Yes, that’s a fair summary of dual momentum.

10

Primus,

Its not something that I would use either. I am going from memory here but…

Part of the reason it worked historically is that it went to cash if current price was below price 52 weeks ago. This might work in certain markets but not in others. Almost like a trailing stop-loss. Overall, I haven’t found much use for stop-losses.

11

Absolute momentum is measured against T-bills (‘risk free asset’). Antonacci’s GEM is never in cash, but in bonds, and that just happens when the 1y return of the SP 500 is below the one year return of the T-Bills.

GEM has been backtested from 1950 to present times, check http://www.optimalmomentum.com/gem_trackrecord.html

Now, there is a slightly disagreement on the application of DM to individual securities, while Antonacci says it does not work, we have others like Wesley Gray from Alpha Arquitect that is having success purely applying price momentum (although they do use a low vol factor).
I recommend Antonacci’s book!

12

I would 2nd the recommendation of Gary’s book. Very well researched and written.

Clarifying an earlier point, GEM is in aggregate bonds only when the 1-year performance of BOTH the S&P 500 and international stocks trails that of t-bills.

13

Yah, I understand that they compare it to a short-term bond return over the past year but you’d get the effect as picking an arbitrary low number like 0 or -1 or 1 or 2. I mean, they are not comparing it to anything that is high yield. The point is that if annual returns are less than what you get in a savings account, or cash or short-term bond (return that is close to zero with a bit of variance) then it switches gears into a low risk low return short-term bond fund.

They dress it up really nice but the underlying logic is the same as a one year trailing stop-loss. But if they called it a stop-loss, there would be a lot of people pointing to evidence how stop-losses don’t really work consistently. Good for trending markets and slowly trending stocks but less so for volatile markets that whipsaw back and forth.

Not my cup of technical tea reading tea.

14

tried to download SPY, ACWX, AGG data from yahoo finance and did a simulation in Excel. GEM lacks SPY quite a lot after 2010. It only exceeds SPY if you start buying before 2008 crash. Usually GEM misses the short term SPY rebound.

15

I tried extrapolating the double momentum concepts to ETF selection with unimpressive results. It turns out that an ETF that outperforms its peers over 3 months to a year hasn’t tended to do much better going forward. I think that this is attributable to the fact that out-performance is a double-edge sword. Out-performance could mean that it was better managed, or it could equally as well signal future reversion to the mean. It could also mean nothing.

I’m with y’all else who suggested that the good backtest results could be attributable to a magical (i.e., spurious) constant of the universe.

16

GEM’s out of sample performance from 2015-2018 was also unimpressive.

17

I also asked Gary regarding recent performance, he mentioned the performance is based on index, when we simulate using ETF, the performance is worse.