Momentum Asset Allocation
Rank asset classes on recent return and hold only the top of the list — a rotational system, not a per-asset on/off switch.
Definition
Compare trailing returns (often 1–12 months) across equities, bonds, commodities, REITs. Allocate to the N strongest; drop the rest. Rebalance monthly. Unlike trend-following, something is almost always held — the relative winner — even if everything is falling.
Why it matters
Relative momentum can stay long the least-bad sleeve in a bear. That is also how it fails: it rotates into the last bubble.
Case
A four-asset rotation that spent 2022 in the ‘best’ of a set that was all down. Relative rank is not a cash filter.
How to read it
State N, the lookback, and whether you allow cash. Pair with an absolute trend overlay if you need a risk-off state.
Key papers
Landmark references with real publisher or arXiv links — not token-overlap noise.
- Relative Strength Strategies for InvestingFaber · 2010 · SSRNCross-asset relative strength.