Mutual Fund Momentum Ranking with Quarterly Rebalancing

Summary

This document describes a cross-sectional momentum strategy for equity mutual funds. It first limits the universe to no-load funds, then ranks eligible funds by their trailing six-month returns. The portfolio holds the top decile, equally weighted, and rebalances quarterly, keeping selected funds for three months. The implementation notes a universe of approximately 850 funds and requires recent observations before calculating momentum.

The document suggests that alternative signals, including proximity to a one-year net asset value high and momentum factor loading, could be combined with past returns. It provides implementation details but no performance results or comparison of predictor variants. The example notes that its data begin mostly in 2014 and that trading did not occur before 2015, limiting what can be inferred from that backtest. Fee assumptions and the use of leverage in the implementation also affect how its results would translate to live trading.

Key ideas

• The strategy ranks no-load equity mutual funds by their trailing six-month returns.
• It invests equally in the highest-returning decile and rebalances quarterly.
• The implementation checks that each fund has sufficiently recent data before ranking it.
• The document proposes combining return momentum with other fund-level momentum measures.
• The example has a limited history and reports no performance evidence.

Tags

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