Quant Strategies: Historical Performance Update (2018)

This post updates the quant strategies performance through year end 2018. For this year I decided to combine the 2018 year end performance and the overall historical returns update for the strategies all in the same post. The 2017 versions of the posts are here and here. If you’re new to all this quant stuff, and like what you see, you can start on my Portfolios page and read though the posts in the quant section. Then you can dive into more detail by reading the posts in the quant category on the blog. Better yet, buy What Works On Wall Street. And if you’re really into it consider subscribing to my QuantPulse service which does all the heavy lifting for you. Let’s jump right into it.

For QuantPulse subscribers, the performance numbers in the SP-UI section of this post are similar to the 25 stock versions of the strategies in QuantPulse.

First, let’s start with the buy and hold versions of these strategies. Basically, at the beginning of the year you run the screens, buy the top 25 stocks on the list and hold for 1 year. Then re-balance. The historical results for the various strategies I track are below. This year I decided to break out the last 3 years into the individual years.

Note: all returns post 2009 are out of sample.

As the table shows, 2018 was a rough year for the quant strategies, just like the overall market. But over longer time periods the strategies still offer much better performance than the broad market and even the various factors (value, momentum, etc).

The next table shows the performance of the same quant portfolios but using the SPY-UI indicator to manage the significant market drawdowns that are par for the course for these type of quant strategies. You can read about using the SPY-UI indicator in quant portfolios here. And you can read about by Economic Pulse Newsletter here, which uses a enhanced version of this indicator for better results.

Note: all returns post 2009 are out of sample.

As the table shows, 2018 was just as rough since the SPY-UI indicator did not trigger during the year but results over time are still impressive and better than the buy and hold versions of these strategies. All of these strategies require patience and work really well over long periods of time.

In summary, despite the rough 2018, the quant portfolios have stood the test of time, have outperformed the SP500 in bull and bear markets, and have outperformed a basket of representative factor ETFs.

That’s about it. I’ll put these updated tables in the Portfolios section as well.