{"id":40890417,"date":"2024-03-25T10:35:59","date_gmt":"2024-03-25T05:05:59","guid":{"rendered":"https:\/\/stockviz.biz\/index.php\/?p=40890417"},"modified":"2024-03-25T10:35:59","modified_gmt":"2024-03-25T05:05:59","slug":"linear-model-momentum","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2024\/03\/25\/linear-model-momentum\/","title":{"rendered":"Linear Model Momentum"},"content":{"rendered":"\n<p>More often than not, simple models outperform complicated ones. Inspired by some recent academic research that showed that linear regressions yielded better momentum performance, we did a quick backtest to check if building a linear model through recent 12 and 1\/3\/6-month performance and creating a portfolio using its next-month predictions made sense.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/momentum\/lm%2012~1\/symRetsAll.vol.png?raw=true\" alt=\"\" \/><\/figure>\n\n\n\n<p>Counter-intuitively, a na\u00efve momentum strategy outperformed linear models. <\/p>\n\n\n\n<p>This is not our first run-in with linear regressions. Our\u00a0<a href=\"https:\/\/stockviz.biz\/theme-eq\/1015B1E9-6D8D-4A08-9EB1-EB57C23B6895\" target=\"_blank\" rel=\"noreferrer noopener\">Dynamic Linear Model<\/a>\u00a0strategy simply regresses prices to a 45* line and ranks them based on goodness of fit. <\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"585\" src=\"https:\/\/portalvhds29z8xdrqhczq.blob.core.windows.net\/wordpress\/2024\/03\/linear-all-1024x585.png\" alt=\"\" class=\"wp-image-40890418\" srcset=\"https:\/\/portalvhds29z8xdrqhczq.blob.core.windows.net\/wordpress\/2024\/03\/linear-all-1024x585.png 1024w, https:\/\/portalvhds29z8xdrqhczq.blob.core.windows.net\/wordpress\/2024\/03\/linear-all-300x171.png 300w, https:\/\/portalvhds29z8xdrqhczq.blob.core.windows.net\/wordpress\/2024\/03\/linear-all-768x439.png 768w, https:\/\/portalvhds29z8xdrqhczq.blob.core.windows.net\/wordpress\/2024\/03\/linear-all-250x143.png 250w, https:\/\/portalvhds29z8xdrqhczq.blob.core.windows.net\/wordpress\/2024\/03\/linear-all.png 1400w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p>Most of the time, of all the different ways to skin the cat, the simplest is the best one.<\/p>\n\n\n\n<p>Code on <a href=\"https:\/\/github.com\/stockviz\/blog\/tree\/master\/momentum\/lm%2012~1\" data-type=\"link\" data-id=\"https:\/\/github.com\/stockviz\/blog\/tree\/master\/momentum\/lm%2012~1\">github<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>More often than not, simple models outperform complicated ones. Inspired by some recent academic research that showed that linear regressions yielded better momentum performance, we did a quick backtest to check if building a linear model through recent 12 and 1\/3\/6-month performance and creating a portfolio using its next-month predictions made sense. Counter-intuitively, a na\u00efve &hellip; <\/p>\n","protected":false},"author":2,"featured_media":2091813,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3471],"tags":[3491],"class_list":["post-40890417","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing-insight","tag-momentum","entry"],"_links":{"self":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/40890417","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=40890417"}],"version-history":[{"count":0,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/40890417\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media\/2091813"}],"wp:attachment":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media?parent=40890417"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/categories?post=40890417"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/tags?post=40890417"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}