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Investing

Drawbacks of Simple Momentum

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By Douglas A. McIntyre Published
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From World Beta

As a number of readers have pointed out, there are various drawbacks to the method/test I have presented here. The big ones are:

1. Fixed measurement period. I used a simple one-month and one-year absolute measure, but its is possible that 3, 6, X months would work better (or a combination of measurement periods).
2. Fixed holding period. This is the biggie to me – it doesn’t make sense to me to sell an asset class that is moving up. And, on the downside, to be "stuck" in an investment that is declining. In the following articles we will detail a system using moving averages – basically a trend following methodology – that allows you to stay in asset classes that are moving up while exiting those that are declining. The method is detailed in my white paper, "A Quantitative Approach to Tactical Asset Allocation."

Posted by Mebane Faber

http://worldbeta.blogspot.com/

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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