Sector Momentum Rotational System

The three-gate gauntlet · genuine only if it clears all three and survives adversarial refutation

Gate 1

Survivorship-free

immune

clean panel

Eliminated here

Gate 2

Placebo ≥ P95

P46

outranked ~92 of 200 baskets

Gate 3

Cost-aware net

RF +3.56

positive, not certified

Failed

Worst 12-month leg (RF)-0.82

−1.00 floor0

Every strategy here — winners included — loses in its worst 12 months. Depth is honest context, not the verdict.

Rejected at the luck gate — its net ranked no better than random baskets (below the P95 skill line).

The strategy rotates capital toward the sector ETFs that have recently outperformed, in the tradition of the Moskowitz & Grinblatt (1999) sector-momentum literature.

What we found

Ranking sectors by past return and holding the leaders produced no measurable skill beyond simply holding the sector basket itself. Against shuffled-signal baskets the real result landed at the 46th percentile, so the sorting rule adds nothing a random rotation would not. What remains is diversified sector beta, not a distinct momentum alpha, and the worst-year risk-adjusted return was negative. This one failed the audit.

How we tested it

2005–2026 test windowmodelled liquidity-aware costssurvivorship immune

Tested on a set of liquid sector ETFs. Realistic modelled costs.
Placebo / robustness test: real result vs random baskets or shuffled signals (real vs the 95th percentile of random)

Source: Sector-momentum rotation (Moskowitz & Grinblatt 1999 lineage)
Read the paper ↗

← The Academic Audit — all 54 studies

Research, not investment advice. “Validated” factor-legs are market-neutral diversifying building blocks with a losing worst year — none is a standalone tradeable strategy. Metrics are cost-aware and modelled (not live fills); the 2005–2026 test window is out-of-sample versus the source paper. Dollar figures are not returns and are omitted by design.