Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

USAA ETFs - Combining Momentum + Value (The backtest doesn't look so good for small caps)

edited March 2018 in Fund Discussions
Indexes for USAA domestic ETFs

MSCI SELECT VALUE MOMENTUM BLEND INDEXES [home page]
https://www.msci.com/msci-select-value-momentum-blend-indexes
    The MSCI Select Value Momentum Blend Indexes are designed to represent the performance of a strategy that seeks higher exposure to value and momentum factors within the parent index while also maintaining moderate index turnover and lower realized volatility than traditional cap weighted indexes...
MSCI USA SMALL CAP SELECT VALUE MOMENTUM BLEND [pdf]
https://www.msci.com/documents/10199/1f9001e4-29fa-4d23-a274-e740dbb6e292

MSCI USA SELECT VALUE MOMENTUM BLEND [pdf]
https://www.msci.com/documents/10199/21e2d160-e14b-426f-9202-f1f501d0c2d7

MSCI Select Value Momentum Blend Indexes Methodology [pdf]
https://www.msci.com/documents/1296102/7137327/MSCI_Select_Value_Momentum_Blend_Indexes_Methodology_August2017.pdf/81e66bd3-db44-4e75-b733-9f765c609ab6

(Don't know how to post images, sorry)

See links above for links to home page and pdf 'factsheets' for each of the above two indexes.

These indexes are the indexes used in the USAA ETFs:

ULVM (large cap)
https://www.usaa.com/investments/etf-details?lookAndFeel=iframe_gadget&ucsp=lookAndFeel#0411

USVM (small cap)
https://www.usaa.com/investments/etf-details?lookAndFeel=iframe_gadget&ucsp=lookAndFeel#0412

While large cap 'looks great' in backtest, anyone else 'troubled' by the underwhelming performance (in the 'backtest') of the USVM/Small Cap index?

Believe it may be due to higher transactions costs for small stocks. A consideration of these is discussed in the following post, which references an apparently-unrelated-to-specific-MSCI-strategy Gerstein Fisher article on combinations of value and momentum strategies.

Comments

  • Gerstein Fisher article on combining value and momentum strategies

    COMBINING VALUE AND MOMENTUM
    Gregg Fisher, Ronnie Shah, and Sheridan Titman, Journal of Investment Management, 2016Q2

    Summary
    http://gersteinfisher.com/gf_article/on-the-road-to-multi-factor-investing-combining-value-and-momentum/

    Full Paper
    http://gersteinfisher.com/wp-content/uploads/2016/04/GF_Research_Combining-Value-and-Momentum_JOIM.pdf
      This paper considers several popular portfolio implementation techniques that maximize exposure to value and/or momentum stocks while taking into account transaction costs.

      Our analysis of long-only strategies illustrates how a strategy that simultaneously incorporates both value and momentum outperforms a strategy that combines pure-play value and momentum portfolios that are formed independently.

      There are two advantages of the simultaneous strategy.

      The first is the reduction in transaction costs; the second is better utilization of unfavorable value and momentum information in a long-only portfolio.

      Our analysis also addresses the optimal way to combine the faster-moving momentum signal with the slower-moving value signal.
Sign In or Register to comment.