{"id":40890243,"date":"2023-04-21T10:16:42","date_gmt":"2023-04-21T04:46:42","guid":{"rendered":"https:\/\/stockviz.biz\/index.php\/?p=40890243"},"modified":"2023-04-21T10:16:52","modified_gmt":"2023-04-21T04:46:52","slug":"momentum-formation-period","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2023\/04\/21\/momentum-formation-period\/","title":{"rendered":"Momentum Formation Period"},"content":{"rendered":"\n<p>Previously, we looked at <a rel=\"noreferrer noopener\" href=\"https:\/\/stockviz.biz\/index.php\/2023\/04\/14\/momentum-skip-month\/\" target=\"_blank\">skip-months<\/a> and <a rel=\"noreferrer noopener\" href=\"https:\/\/stockviz.biz\/index.php\/2023\/04\/18\/momentum-rebalance-frequency\/\" target=\"_blank\">rebalance frequencies<\/a> for momentum portfolios. A 1-month skip &amp; monthly rebalance turned out to be ideal. However, we did these analyses keeping the formation period the same at 12-months. What if we changed that as well?<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/raw.githubusercontent.com\/stockviz\/blog\/master\/momentum\/formation-period\/symStatsTop.png\" alt=\"\" \/><\/figure>\n\n\n\n<p>Turns out, there is no single &#8220;ideal&#8221; formation period where all stats converge. However, if set the rebalance frequency to 1-month, the average of the formation periods of the top performing portfolios works out to 12-months. <\/p>\n\n\n\n<p>If the momentum fund is large enough, then it could probably be sliced into multiple sub-portfolios, each with different configs to avoid this magic 12-month formation.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/raw.githubusercontent.com\/stockviz\/blog\/master\/momentum\/formation-period\/symRetsAll.png\" alt=\"\" \/><\/figure>\n\n\n\n<p>Also, since the underlying process creating these portfolios is the same, the equity curves come out all bunched together. There maybe differences in month-over-month performances but they are all highly correlated.<\/p>\n\n\n\n<p>Code, charts and statistics on <a href=\"https:\/\/github.com\/stockviz\/blog\/tree\/master\/momentum\/formation-period\" target=\"_blank\" rel=\"noreferrer noopener\">github<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Previously, we looked at skip-months and rebalance frequencies for momentum portfolios. A 1-month skip &amp; monthly rebalance turned out to be ideal. However, we did these analyses keeping the formation period the same at 12-months. What if we changed that as well? Turns out, there is no single &#8220;ideal&#8221; formation period where all stats converge. &hellip; <\/p>\n","protected":false},"author":2,"featured_media":2089693,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3471],"tags":[3541,3491],"class_list":["post-40890243","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing-insight","tag-backtest","tag-momentum","entry"],"_links":{"self":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/40890243","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/comments?post=40890243"}],"version-history":[{"count":0,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/40890243\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media\/2089693"}],"wp:attachment":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media?parent=40890243"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/categories?post=40890243"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/tags?post=40890243"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}