Combining Look-Back Windows for Equity Price Momentum

Abstract

Many studies have provided theories explaining the phenomenon of equity momentum. However, none of these studies have explored the differences between various lookback windows. This paper will investigate the advantages and disadvantages of combining various look-back windows using a time-series momentum strategy. The ten sectors of the S&P500 will be back-tested to obtain optimal look-back window combinations that maximizes Sharpe. These optimal combination of windows for each sector will then be compared with historical macro events to understand why certain windows outperform others during market inflections. The aim of this paper is to give smart beta fund managers a new insight into the benefits of combining various lookback windows in a time series momentum strategy for equities.