Seasonal SACEVS-SACEMS Strategy?

A subscriber requested testing of a strategy that holds a combination of 50% Simple Asset Class ETF Value Strategy (SACEVS) Best Value and 50% Simple Asset Class ETF Momentum Strategy (SACEMS) equal-weighted (EW) Top 2 strategies during November through April and idle cash during May through October. We consider three strategies:

1. Best Value – EW Top 2 – hold Best Value-EW Top 2 during all months.
2. Best Value – EW Top 2 Seasonal (Idle Cash) – hold Best Value-EW Top 2 during November through April and idle cash during May through October, as requested.
3. Best Value – EW Top 2 Seasonal (6-month T-bill) – hold Best Value-EW Top 2 during November through April and 6-month U.S. Treasury bills (T-bill) bought at the beginning May each year during May through October.

We run annual statistics for each variation as in “Combined Value-Momentum Strategy (SACEVS-SACEMS)”. Annualized returns are compound annual growth rates. Maximum drawdown is the deepest peak-to-trough drawdown for these strategies based on monthly measurements over the sample period. For Sharpe ratio, to calculate excess annual return, we use average monthly yield on 3-month Treasury bills during a year as the risk-free rate for that year. Using monthly returns for SACEVS Best Value and SACEMS EW Top 2 and the specified T-bill yield during July 2006 through October 2023, we find that: (more…)