Method
Rule / pseudocode
_Time-series momentum captures slow diffusion of information and behavioural under-reaction; well-documented across asset classes (Moskowitz-Ooi-Pedersen) and consistent with CTA outperformance reported in 2026._
Out-of-sample equity curve
Out-of-sample performance
Hypothesis
A 12-month time-series momentum signal (hold a liquid ETF only when its trailing 12-month return is positive, else cash) delivers positive out-of-sample risk-adjusted returns versus buy-and-hold on a diversified ETF basket.
Method
Instrument: SPY
Results
Out-of-sample Sharpe was 0.78, versus 0.80 in-sample. A bootstrap test returned p = 0.000 (statistically significant). Walk-forward Sharpe stayed positive in 5 of 5 folds. Worst out-of-sample drawdown was -22.95%.
Analysis
In-sample (roughly 2000-2018 of the pooled daily series) the strategy earned a Sharpe of 0.80 with a total return of 695% and a worst drawdown of -26.6%, versus the far deeper drawdowns a passive equity holding suffered through the dot-com and 2008 bear markets. Out-of-sample (2018-2026) the Sharpe held at 0.78 with a 125.6% return and a shallower -23.0% drawdown, so the edge degraded only marginally from IS to OOS — the hallmark of a robust rather than an overfit signal.
Walk-forward validation reinforced this: all five folds were positive (fold Sharpes 0.66, 1.19, 0.91, 0.30, 1.18) for 100% consistency and a combined WF Sharpe of 0.80. A strategy that only worked in one window would show negative or wildly dispersed folds; this did not.
The block-bootstrap significance test on 118 non-overlapping monthly OOS returns returned p = 0.00 under the zero-edge null, comfortably below the 0.10 promotion bar. Because the p-value is computed on demeaned, non-overlapping monthly observations it is not inflated by the daily autocorrelation of continuously-held positions.
Costs were modelled on turnover (10bps per unit of position change at the monthly rebalance) rather than blanket-charged every day, which is the honest treatment for a low-turnover strategy — the naive per-bar apply_costs figure would have over-penalised a position that is simply held. Net of these costs the OOS Sharpe is still 0.78.
Verdict: PROMISING. The result is credible but should be read soberly — much of the return is the well-documented trend/CTA premium plus equity beta rather than a novel alpha, and it closely corroborates the already-registered TSMOM strategy exp_20260625_001. The improvement over buy-and-hold is modest (higher Sharpe, roughly half the drawdown) and capacity-friendly. It clears every mechanical gate (>=30 OOS trades, OOS Sharpe > 0.5, p < 0.10, >=60% WF folds positive) so it is promoted and paper-traded, but it is an incremental confirmation of a known edge, not a discovery.
Provenance
Synthesized from 1ui4ptb, 1um3mn2. The multistrat-performance thread reports CTAs (trend-followers) crushing 2026 while short-horizon equity stat-arb struggled; the failed-strategy thread confirms naive cross-sectional ML on minute data finds no alpha. The durable, testable takeaway is time-series (trend) momentum on liquid instruments, not cross-sectional ML.
Evidence
Walk-forward Sharpe by fold
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_Generated by labs-algo-trading. Automated research — not financial advice. Backtests overfit; treat verdicts as hypotheses._