The Test Bench › index_rule
Does Fastest-Growing Market Cap (top 100) actually work?
MARGINALReal but small -- not worth what it costs to run.
The claim
Rank by 12-month market-cap growth; hold the top 100, equal-weight — Trading Truth (our test)
What we did
Tested against Cap-weight SPY, buy & hold, 2017-2026, 100-stock equal-weight, annual rebalance, survivorship-free.
The result
Result: 21.9 %/yr CAGR (cap-weight = +12.5)
+21.9%/yr CAGR, Sharpe 0.76, maxDD -63% (2017-21 +24/yr, 2022-now +20/yr)
Verdict
Your instinct is right -- it beat cap-weight by +9%/yr. But cap growth is mostly price growth, so this is momentum's wilder cousin: same idea, a far worse -63% drawdown. Momentum (ranking on price directly) does the same job with less wreckage.
What the test did and did not do
- survivorship-free universe
- point-in-time data
- checked for look-ahead
- net of real costs
- tested out of sample
Almost nobody publishing a backtest says which of these they did. We list the ones we failed as well as the ones we passed.
Tested 2026-06-23. The same treatment, applied to every other system, is on the test bench.
Written with AI assistance from our own test database. The numbers are computed, not composed.
General market commentary for education, not personalised investment advice. Backtested results are hypothetical. Trading carries a real risk of loss.