Antonacci, Gary - Dual Momentum Investing: Mcgraw-Hill, 2015, (Finance) Grade

SHARING OF FINANCIAL WISDOM
Antonacci, Gary – Dual Momentum Investing

McGraw-Hill, 2015, [Finance] Grade
This is not a text on stock picking strategies as I The last part of the book presents Antonacci’s
mistakenly assumed; it’s a book on asset allocation model and discusses tweaks and alternatives. The
using momentum strategies. Gary Antonacci with a model looks to the performance over the last 12
background in as diverse areas as the US Military, months and matches the best performer of US
Harvard Business School and touring as a comedy stocks and international stocks against US T-bills.
magician, is a pioneer in developing derivate-based If the best performing equity index has
investment strategies. Here he’s written a book outperformed T-bills then the money goes into this
aiming to take the academic underpinnings of equity index. If not, then money will be invested in
momentum strategies and show how these can be bonds. The strategy is executed through liquid
profited from. The proposed strategy called Global ETFs with low transaction costs.
Equities Momentum (GEM) uses a combination of
relative momentum to decide where to invest In the author’s backtests the GEM strategy 1974 to
within equities and absolute momentum to decide 2013 gives a brilliant annual return of 17.4 percent,
when to be in equities in the first place. with a Sharpe ratio of 0.87 and a maximum
drawdown of 22.7 percent. This is compared to a
The book could broadly be divided into 3 parts. global equity index with 8.9 percent returns, 0.22 in
The first few chapters are a tour of the academic Sharpe ratio and a maximum drawdown of 45.7
theory of efficient markets, of behavioural finance percent. As a side note, Warren Buffett’s Sharpe
and of momentum investing but also of the history ratio during about the same period was 0.76.
of momentum practitioners. The crude summary is
that EMT is wrong and momentum investing The strategy is a rather unassuming yet efficient
works. The latter is thanks to behavioural factors. combination of equity universe selection based on
The reader is served a veritable who’s who of relative price momentum and a risk management
financial academia and momentum investing and strategy based on relative equity market
despite that in my opinion it’s a bit over the top to momentum compared to T-bills. Since T-bills will
refer to 217 academic papers and books on the 141 return something close to zero, this latter could be
pages of Dual Momentum Investing, the text is still said to be an absolute strategy. Since the stock
really enjoyable. However, if the reader hasn’t a indices lack a risk management strategy, the best
complete overview of academic research it is hard relative performance for GEM is in stock market
to control for the author’s potential selection bias crashes. The absolute momentum part is obviously
in which academic papers are brought forward. To an intellectual cousin to using 200-day moving
the best of my knowledge the picture that is averages and Antonacci shows that the strategies
painted is reasonably objective. yield very similar results.
The next set of chapters gives background The free spirited character and anti-authoritarian
information to the GEM strategy. A number of streak of Antonacci come forward in a nice way in
alternative asset classes and investment strategies the text. At the same time the author is extremely
are examined. The general conclusion is that learned. If something I would have liked to hear
investors haven’t been able to generate alpha more about Antonacci’s own experiences in the
through them or that they haven’t shown much markets to complement all the academic research.
absolute returns over time or that something else is
I would say that the average investor would get
wrong with them. Although I sympathize with
much better investment returns by switching to the
momentum investing I found this part a bit over-
GEM strategy. However, if everybody did switch it
selling. Basically noting works apart from
would destabilize the financial markets - but this is
momentum.
clearly true of any investment strategy.
Mats Larsson, February 21, 2016
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SHARING OF FINANCIAL WISDOM

Antonacci, Gary – Dual Momentum Investing

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