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USAA ETFs - Combining Momentum + Value (The backtest doesn't look so good for small caps)
MSCI SELECT VALUE MOMENTUM BLEND INDEXES [home page] https://www.msci.com/msci-select-value-momentum-blend-indexesThe 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
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.
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.
Comments
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.