Combining Value and Momentum Across Asset Classes

Summary

The document outlines a global tactical allocation strategy that combines value and momentum signals across asset classes. It ranks investable markets using 12-month momentum, 1-month momentum, and an asset-specific valuation measure: earnings yield for equities and yield to maturity for bonds, with stated adjustments to account for structural yield differences. The example assigns half the weight to value and a quarter to each momentum signal, then goes long the top quartile and short the bottom quartile.

The cited study reports statistically and economically significant returns for this combined approach across twelve asset classes over its sample, with performance also reported out of sample and after estimated transaction costs. The page also describes positive performance in higher-VIX periods and points to related research on factor returns across markets. These are summaries of source research, not a complete implementation or independent validation. Results depend on the chosen instruments, valuation adjustments, data and trading costs; the page gives no full portfolio construction or risk-control specification.

Key ideas

• The strategy ranks asset classes using both short- and intermediate-horizon momentum and valuation signals.
• Equity valuation uses earnings yield, while bond valuation uses yield to maturity with asset-specific adjustments.
• The example combines the signals with half the weight assigned to value and equal quarter weights to each momentum measure.
• It forms a long portfolio from the highest-ranked quartile and a short portfolio from the lowest-ranked quartile.
• The cited study reports cross-asset results, but the page does not provide enough detail to reproduce or independently assess the full backtest.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.