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Popular ETFs

quantf research Strategies

Strategies Long Short
Strategy 1 SPY QID
Standard Momentum TNA TZA

Historical Cumulative Return

Performance Evaluation

Statistics Strategy 1 Standard Momentum Market (SPY)
Average 0.13 0.13 0.15
Volatility 0.21 0.42 0.16
Sharpe 0.62 0.31 0.91
Max 0.12 0.19 0.09
Min -0.13 -0.27 -0.13
Cumulative 1.05 0.29 1.46
Drawdown 0.36 0.63 0.18
Duration 139.00 150.00 35.00
Profit/Loss 0.97 0.91 0.96
Win Rate 0.56 0.55 0.60
Expectation 0.11 0.06 0.18

What is the quantf research Popular ETFs Momentum Trading all about?

The quantf research Popular ETFs Momentum Trading is a product of quantf research website (www.quantf.com). It provides trading pairs trading recommendations for the most popular (high volume) ETFs. There are two investment strategies: Strategy 1 that adapts the momentum methodology of Papailias and Thomakos (Forthcoming) and the Standard Momentum that applies the traditional cross-sectional momentum (i.e. buy the winners and sell the losers). 

How do I read the quantf research Popular ETFs Momentum Trading Strategies table?

There are two investment strategies on the quantf research Popular ETF Momentum Trading Strategies table. Strategy 1 is based on the Papailias and Thomakos (Forthcoming) adaptation of the momentum methodology whereas Standard Momentum strategy uses the traditional cross-sectional momentum with 1 year of daily data for ranking the ETFs (12 months is a popular choice for calculating momentum strategies in the related literature). Each strategy buys the winner (column title: Long) and sells the loser (column title: Short).

What are the characteristics of the quantf research Popular ETFs Momentum Trading Strategy?

The literature on momentum has mostly looked at trading horizons that are at the monthly level, and it has been quite thoroughly explored at that level. We use weekly data and trading frequency to accommodate three issues: the intra-month mean reversion opportunities, the requests of many followers for weekly strategies and, last but not least, the use of our own momentum adaptation which provides improved performance characteristics over standard momentum.

How do I read the Historical Cumulative Return figure?

The quantf research Historical Cumulative Return Figure illustrates the cumulative return an investor has by investing in each one of the suggested strategies (including the market portfolio (SPY) that acts as a benchmark.

What do all the statistics mean?

  • Average: the annualised arithmetic mean return of the respective strategy. The typical investor wishes for large average values.
  • Volatility: the annualized standard deviation of the respective strategy. The typical investor wishes for small volatility values.
  • Sharpe: the ratio of average over volatility. The typical investor wishes for large Sharpe Ratio values.
  • Max: the maximum daily return of the respective strategy.
  • Min: the minimum daily return of the respective strategy.
  • Cumulative: the cumulative return of the respective strategy. The typical investor wishes for large Cumulative values. This is expressed in decimals instead of percentage; e.g. 1.00 instead of 100%.
  • Drawdown: the maximum drawdown of the respective strategy. The maximum drawdown could be simply interpreted as the largest decline in ETF value in percent from a historical peak. The typical investor wishes for small drawdown values.
  • Profit/Loss: the ratio of the arithmetic mean of positive returns over the (absolute value) of the arithmetic mean of negative returns. The typical investor wishes for large Profit/Loss values.
  • Win Rate: the percentage of time that the strategy exhibits positive returns.
  • Expectation: indicator of anticipated performance computed as (1+Profit/Loss)*(Win Rate) – 1.

 

Why are the last 11 periods used?

A fixed rolling window period of 11 past observations is used for two reasons: first, an extensive backtesting indicates that this number is a reasonable one in terms of robustness to alternatives and overall performance and risk management; second, it is meant to account for short-term changes in asset behaviour in a time frame that is consistent with trading strategies suggested elsewhere on quantf research website. One would, of course, get different results from the use of another rolling window 

How often are new trading picks suggested?

Trading picks are suggested on a weekly basis. 

What is the source of the data used?

In all computations the data is collected from Yahoo! Finance (finance.yahoo.com). quantf research is not responsible for the accuracy of the data. quantf research does not redistribute the data which are used exclusively for research and information purposes.

What are the ETFs used in this strategy?

Here follows a list of all the ETFs used in the quantf research Popular ETFs Momentum Trading product. All descriptions and details are taken from the ETF Database website.

 

Popular ETFs based on avg. trading volume

  • SPY: This ETF tracks the index that measures the performance of the large capitalisation sector of the U.S. equity market. Issued by State Street SPDR.
  • EEM: This ETF tracks the index that measures the performance of the emerging market stocks. Issued by iShares.
  • XLF: This ETF tracks the index that includes companies from the following industries: diversified financial services; insurance; commercial banks; capital markets; real estate investment trusts; thrift & mortgage finance; consumer finance; and real estate management & development. Issued by State Street SPDR.
  • EWJ: This ETF tracks the index that measures the performance of the Japanese equity market. Issued by iShares.
  • IWM: This ETF tracks the Russell 2000 index. This index measures the performance of the small-cap segment of the U.S. equity universe and is comprised of the smallest 2000 companies in the Russell 3000 Index, representing approximately 10% of the total market capitalisation of that Index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. Issued by iShares.
  • QQQ: This ETF tracks the index that includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalisation. Issued by Invesco PowerShares.
  • EFA: This ETF tracks the index that measures the performance of equity markets in European, Australasian, and Far Eastern markets. Issued by iShares.
  • VWO: This ETF tracks the index that represents components of the FTSE Emerging Index and South Korean stock exposure. FTSE Emerging Markets ETF is an exchange-traded share class of Vanguard Emerging Markets Stock Index Fund. The fund invests substantially all (normally about 95%) of its assets in the common stocks of the index, while employing a form of sampling to reduce risk. The FTSE Emerging Transition Index will gradually reduce South Korean equity exposure over about six months while proportionately adding exposure to stocks of companies located in other countries based on their weightings in the destination index, the FTSE Emerging Index. Issued by Vanguard.
  • FXI: This ETF tracks the index that measures the performance of the largest companies in the China equity market. Issued by iShares.
  • GLD: This ETF is designed to track the spot price of gold bullion. Issued by State Street SPDR.
  • EWZ: This ETF tracks an index which is designed to measure broad based equity market performance in Brazil. A capping methodology is applied that limits the weight of any single component to a maximum of 25% of the MSCI Brazil 25/50 Index. Additionally, the sum of the components that individually constitute more than 5% of the weight of the MSCI Brazil 25/50 Index cannot exceed a maximum of 50% of the weight of the MSCI Brazil 25/50 index in the aggregate. The index consists of stocks traded primarily on the stock exchanges in Brazil. Issued by iShares.
  • TNA: The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is comprised of the smallest 2000 companies in the Russell 3000 Index, representing approximately 10% of the total market capitalisation of that Index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. This is a bullish ETF. Issued by Direxion.
  • SLV: This ETF is designed to track the spot price of silver bullion. Issued by iShares.
  • XLE: This ETF tracks the Energy Select Sector Index includes companies from the following industries: oil, gas & consumable fuels and energy equipment & services. Issued by State Street SPDR.
  • XLI: This ETF tracks the Industrial Select Sector Index. This index includes companies from the following industries: industrial conglomerates; aerospace & defense; machinery; air freight & logistics; road & rail; commercial services & supplies; electrical equipment; construction & engineering; building products; airlines; and trading companies & distributors. Issued by State Street SPDR.
  • SDS: This ETF tracks seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the S&P500 Index. Issued by ProShares.
  • IAU: This ETF is designed to track the spot price of gold bullion. Issued by iShares.
  • FAS: The Russell 1000 Financial Services Index is a capitalization-weighted index of companies that provide financial services. This is a bullish ETF. Issued by Direxion.
  • IYR: This ETF tracks an index measures the performance of the real estate industry of the U.S. equity market. Issued by State Street SPDR.
  • XLB: This ETF tracks the Materials Select Sector Index. This index includes companies from the following industries: chemicals; metals & mining; paper & forest products; containers & packaging; and construction materials. Issued by State Street SPDR.
  • TLT: This ETF tracks the index that measures the performance of U.S. Treasury securities that have a remaining maturity of at least 20 years. Issued by iShares.
  • XLK: This ETF tracks the Technology Select Sector Index. This includes companies from the following industries: computers & peripherals; software; diversified telecommunication services; communications equipment; semiconductor & semiconductor equipment; internet software & services; IT services; wireless telecommunication services; electronic equipment & instruments; and office electronics. Issued by State Street SPDR.
  • SSO:This ETF tracks the S&P 500 Index (200%). This ETF seeks daily investment results, before fees and expenses, that correspond to twice (200%) the daily performance of the S&P 500 Index. Issued by ProShares.
  • XLU: This ETF tracks the Utilities Select Sector Index. This index includes companies from the following industries: electric utilities; multi-utilities; independent power producers & energy traders; and gas utilities. Issued by State Street SPDR.
  • XLV: This ETF tracks the Health Care Select Sector Index. This index includes companies from the following industries: pharmaceuticals; health care providers & services; health care equipment & supplies; biotechnology; life sciences tools & services; and health care technology. Issued by State Street SPDR.
  • XLP: This ETF tracks the Consumer Staples Select Sector Index. This index includes companies from the following industries: food & staples retailing; household products; food products; beverages; tobacco; and personal products. Issued by State Street SPDR.
  • DIA: This ETF tracks the index the Dow Jones Industrial Average Index. The Dow Jones Industrial Average is a price-weighted index of 30 "blue-chip" U.S. stocks. It is the oldest continuing U.S. market index. Issued by State Street SPDR.
  • XHB: This ETF tracks the S&P Homebuilders Select Industry Index. This index represents the homebuilding sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Homebuilders Index is an equal weighted market cap index. Issued by State Street SPDR.
  • UNG: This ETF tracks the Natural Gas Futures index. The underlying assets of the fund consist of natural gas futures contracts. Issued by US Commodity Funds.
  • XRT: This ETF tracks the S&P Retail Select Industry Index. This index represents the retail sub-industry portion of the S&P TMI. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Retail Index is an equal weighted market cap index. Issued by State Street SPDR.
  • EWT: The index measures the performance of the Taiwanese equity market. Issued by iShares.
  • JNK: This ETF tracks the Barclays Capital High Yield Very Liquid Index. This index includes publicly issued U.S. dollar denominated, non-investment grade, fixed-rate, taxable corporate bonds that have a remaining maturity of at least one year, regardless of optionality, are rated high-yield (Ba1/BB+/BB+ or below) using the middle rating of Moody's, S&P, and Fitch, respectively (before July 1, 2005, the lower of Moody's and S&P was used), and have $600 million or more of outstanding face value. Issued by State Street SPDR.
  • XLY: This ETF tracks the Consumer Discretionary Select Sector Index. This index includes companies from the following industries: retail (specialty, multi-line, internet and catalog); media; hotels, restaurants & leisure; household durables; textiles, apparel & luxury goods; automobiles, auto components and distributors; leisure equipment & products; and diversified consumer services. Issued by State Street SPDR.
  • TZA: The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is comprised of the smallest 2000 companies in the Russell 3000 Index, representing approximately 10% of the total market capitalisation of that Index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. This is a bearish ETF. Issued by Direxion.
  • USO: This ETF tracks changes in the price of light, sweet crude oil, as measured by the changes in price of the futures contract on light, sweet crude oil traded on the New York Mercantile Exchange. Issued by US Commodity Funds.
  • TBT: This ETF tracks the index that measures the performance of U.S. Treasury securities that have a remaining maturity of at least 20 years. Issued by ProShares.
  • QID: This ETF tracks the NASDAQ-100 Index (-200%). This ETF seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the NASDAQ-100 Index. Issued by ProShares.
  • EWH: This ETF tracks the index that measures the performance of the Hong Kong equity market. Issued by iShares.
  • XME:This ETF tracks the S&P Metals & Mining Select Industry Index. The S&P Metals & Mining Select Industry Index represents the metals and mining sub-industry portion of the S&P Total Market Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, American Stock Exchange, NASDAQ National Market and the NASDAQ Small Cap exchanges. The Metals & Mining Index is an equal weighted market cap index. Issued by State Street SPDR.
  • FAZ: The Russell 1000 Financial Services Index is a capitalization-weighted index of companies that provide financial services. This is a bearish ETF. Issued by Direxion.
  • RSX: This benchmark is a rules-based, modified market capitalization-weighted, float-adjusted index intended to give investors exposure to Russia. Issued by Van Eck.
  • EWG: This ETF tracks the index that measures the performance of the German equity market. Issued by iShares.
  • EPI: This ETF tracks the WisdomTree India Earnings Index. This is a fundamentally weighted index that measures the performance of companies incorporated and traded in India that are profitable and that are eligible to be purchased by foreign investors as of the index measurement date. Issued by WisdomTree.
  • HYG: This ETF tracks an index that is designed to provide a broad representation of the U.S. dollar-denominated high yield liquid corporate bond market. Issued by iShares.
  • EWW: This ETF tracks the index that measures the performance of the Mexican equity market. Issued by iShares.
  • EZU: This ETF tracks the index that measures the performance of equity markets of the EMU member countries: those members of the European Union who have adopted the Euro as its currency. Issued by iShares.
  • EWY: This ETF tracks the index that measures the performance of the South Korean equity market. Issued by iShares.
  • EWC: This ETF tracks the index that measures the performance of the Canadian equity market. Issued by iShares.
  • DBC: This ETF tracks a rules-based index composed of futures contracts on 14 of the most heavily-traded and important physical commodities in the world. Issued by Invesco PowerShares.
  • VTI: This ETF tracks the index which represents 99.5% or more of the total market capitalisation of all of the U.S. common stocks regularly traded on the New York and American Stock Exchanges and the Nasdaq over-the-counter market. Issued by Vanguard.
  • EWA: This ETF tracks the index that measures the performance of the Australian equity market. Issued by iShares.
  • EWI: This ETF tracks the index that measures the performance of the Italian equity market (issued by iShares).
  • EWM: This ETF tracks the index that measures the performance of the Malaysian equity market. Issued by iShares.
  • EWS: This ETF tracks the index that measures the performance of the Singaporean equity market. Issued by iShares.
  • EWU: This ETF tracks the index that measures the performance of the British equity market. Issued by iShares.
  • BND: This ETF tracks the index that measures the performance of the U.S. investment grade bond market. Issued by Vanguard.

 

References

Papailias, F., Thomakos, D. D. (Forthcoming). Improved Momentum Strategies. quantf research working paper series.

  
F. Papailias - D. Thomakos, (c) 2014
 
 
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