Momentum backtest

The 20 strongest S&P 500 stocks, monthly

2026MIAX master's, Instituto BME

Figure 1. Cumulative return of the strategy against SPY

Summary

Each month it buys the 20 S&P 500 stocks with the strongest 6- and 12-month momentum, from 2015 on, paying 0.23% per trade and handling stocks that get delisted. Its 10.93% a year beat every one of 25 million random portfolios, which averaged 4.54%.

What it does

A monthly momentum strategy adapted from MSCI's method: each month it buys the 20 S&P 500 stocks with the strongest combined 6- and 12-month momentum, from 2015 on, paying 0.23% per trade. A reserve list handles stocks that stop trading, and prices are kept in a wide dates-by-tickers table so the calculations run vectorised.

Results

It returned 10.93% a year and beat every one of 25 million random portfolios, which averaged 4.54%. The write-up ends with a critical look at what that does and doesn't prove.

Figures

**Figure 2.** Annual return of 25 million random portfolios, with the strategy in red

**Figure 3.** Quarterly returns of the strategy against SPY

**Figure 4.** Eligible universe over time and range of momentum scores

Built with

PythonpandasNumPyParquetMonte CarloJupyter