A Decade of Intertemporal PCA Analysis

Taking a leaf out of Mike Harris' recent Momersion theme, here's a PCA point of view of the balance between momentum and mean reversion over the previous 10 years from the Lazy PCA tool.

August 2015 - 2014

PCA fits momentum and mean reversion components to the daily returns, they balance each other out here, which means the market is somewhat efficient (i.e. 'momersion').

August 2014 - 2013

Momersion.

August 2013 - 2012

Momersion.

August 2012 - 2011

Momersion.

August 2011 - 2010

Largely mean reverting! Large losses followed by large gains and vice versa. Relatively small volatility however.

August 2010 - 2009

Momersion.

August 2009 - 2008

Large mean reversion, large volatility.

August 2008 - 2007

Mean reversion.

August 2007 - 2006

Slightly mean reverting.

August 2006 - 2005

Momersion.

A Momentum Example

August 1971 - 1970, peak S&P 500 daily return momentum, or thereabouts.