@ChaitanyaC
Your guess work that the process will be derailed in non-conducive market is not correct.
@hardik_shah1
In Stocks on the move…where author/Fund manager has applied the quantitative momentum with basic underlying condition that whenever S&P 500 goes below 200 day moving average, he will stop buying new stocks while doing weekly re-balancing. And also stocks will be sold when they go down 100 day moving average of lower ranks.
The effect of these condition was such that during 2000 Dot com burst, or in 2008 in GFC, what automatically happened is, since S&P500 went below 200 day moving average, they stopped buying new stocks. And one by one their stocks in portfolio, out of total 20 stocks started going below 100 day moving average and they started coming into cash. The effect was so dramatic than normal S&P 500 was down 60% during year 2008 while their portfolio was down by merely 17-18% and they went into cash and remained in cash for almost 18 months during that period as S&P 500 was below 200 day moving average , so they couldnot buy any new stocks.
so against the popular belief that during bear markets, momentum portfolio doesnt outperform, actually this quantitative momentum portfolio had a very less drawdown compared to general market index as they were forced into cash during downtime…So when the whole world was going down…they were in cash and protected their downside beautifully.
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