Our earlier post on using a “skip” month for setting up momentum portfolios saw a slight advantage in skipping a month. However, it very will could have been because of path dependence.
Going back to a 20-stock portfolio and separating out the monthly returns of stocks only in the “no-skip” portfolio (RET_NOSKIP) and those that are only in the one-month skipped portfolio (RET_SKIP) doesn’t really settle the debate in favor of skipping a month.
The summary stats are similar as well.
Perhaps the mean reversion that was observed prior to the early 90’s when the original paper was published is weaker now?
Code on github.