The Test Bench › index_rule
Does Price Momentum (buy what's already rising) actually work?
WINNERBeat its benchmark on the honest footing.
The claim
Rank the universe by 12-month return; 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: 27.2 %/yr CAGR (cap-weight = +12.5)
+27.2%/yr CAGR, Sharpe 0.9, maxDD -45% (2017-21 +25/yr, 2022-now +30/yr)
Verdict
THE cold winner. The disciplined version of 'fastest-growing cap': it beat cap-weight by +15%/yr, with a BETTER Sharpe (0.9), and it held up in BOTH the 2017-21 mega-cap bull (+25/yr) AND through the 2022 reset and after (+30/yr). Caveat: a momentum-friendly decade, a still-brutal -45% drawdown, costs not yet modeled. But the cold answer to your question is momentum.
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.