Intraday Momentum

Limited evidence of the momentum effect on 5-minute bars in the SPY

We've written a fair amount about momentum whether in our #30daysofbacktesting series or in our post on using momentum in the S&P 500 sectors to outperform the index. Of course, while momentum might indeed be the premier anomaly, it doesn't always outperform. As we showed in our study of the Fama-French factors, the risk-premium generally dominated, and sometimes profitability was a winner too. As always, relative performance is highly dependent on the period of comparison. Interestingly, there is an ETF, SPMO, that tracks the S&P 500 Momentum Index, created by none other than, wait for it, S&P. That index measures the performance of stocks within the S&P based on their "persistence of relative performance". Without going into too much of the details behind the methodology, for every stock in the index, S&P calculates the 12-month return, scales it, normalizes it, winsorizes it, and then ranks it. Those stocks in the top performing rank are included in the index. The ETF seeks to track this index.

What is interesting is that the index has been investable since 2016 and it has still outperformed the S&P since inception and over the last two and five-year periods. One might have expected the anomaly to have receded like small-cap value has done. But it hasn't. One can see that in the cumulative return chart below.