No. of Recommendations: 10
Matt,

Here's a GTR1 URL for a 93-year backtest of "Riding the Wave" (RtW) with the Fama/French twelve sectors (actually eleven--I threw out the twelfth, "Other"): http://gtr1.net/2013/?!!QlpoMTFBWSZTWdxj7YAAC5vfgBAAIgd!2F8C... That should provide you with the data you need in order to answer your question about whether the strategy has stopped working, if that can be answered at all based on a 3.5 years of results. Note the following:

1. I used RRS instead of Total Return because I don't think I've ever seen a case where it wasn't at least a slightly better momentum metric. (If PortfolioVisualizer doesn't provide it, then ask for it.) It also has the desirable side-effects of reducing both turnover and "noise", including variation by daily trading cycle.

2. The eleven sector investments are market capitalization-weighted total return portfolios.

3. My URL is set to trade the top 3 because it provides the optimal Sharpe(20).

4. I can backtest "60/40" back to 1926, but it requires use of a proprietary index, and I have not asked the person who gave the data to me if I can disclose it, so no URL for it. (Believe me, though, you're not missing anything, and if you ask me, it's a silly benchmark.) If you really want to use 60/40 as your benchmark, email me.

I see that this rendition of the strategy has done fine over the last 42 months. Do I think the antiquated Fama/French sector system (based on the antiquated SIC code system) is better than whatever Fidelity uses (probably GICS)? No. I'd call the performance differences between your strategy and this one "noise" (other than the fact that RRS is at least a little bit better than Total Return for measuring momentum).

I'll also offer my opinion that RtW likely still works as well as it ever has, and that perceptions to the contrary are likely just the result of inflated expectations due to short backtests, inadequate data sampling (i.e., not testing over all trading cycles GTR1-style) or both.

Robbie Geary

P.S. You mentioned avoiding the 2018 correction. If you want any help adding market timing to the trading system, let me know.
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