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Momentum is particularly beneficial when used across different asset classes and when it incorporates absolute as well
as relative momentum. Relative momentum looks at an asset’s price strength with respect to other assets to determine
its future relative performance. Absolute momentum uses an asset’s own past performance to infer its future
performance. Research shows that absolute momentum outperforms relative momentum. But more importantly,
absolute momentum can reduce downside exposure as well. The best approach is to use both types of momentum
together.
Most applications of momentum today use it only with individual stocks and ignore absolute momentum altogether. In
order to remedy this situation, we constructed rules-based, benchmark models using both relative and absolute
momentum applied to market indices and sectors.
Gary Antonacci has over 35 years’ experience as an investment professional focusing on
underexploited investment opportunities. His innovative research on momentum investing was
the first place winner in 2012 and the second place winner in 2011 of the prestigious Wagner
Awards for Advances in Active Investment Management given annually by the National Association
of Active Investment Managers (NAAIM).
Gary is author of the award-winning book, Dual Momentum Investing: An Innovative Approach for
Higher Returns with Lower Risk. His research introduced the investment world to dual momentum, which combines
relative strength price momentum with trend following absolute momentum. He is recognized as a foremost authority on
the practical applications of momentum investing.
Gary received his MBA degree from the Harvard Business School. He serves as a consultant and public speaker on asset
allocation, portfolio construction, and advanced momentum strategies. You can learn more about Gary and dual
momentum investing at http://optimalmomentum.com
APRIL 2016
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