The Viability of Momentum Investing in the Small-Cap V.S. the Large Cap Space
Location
Snydor Performance Hall
Access Type
Open Access
Presentation Type
Oral presentation
Entry Number
2399
Start Date
4-16-2025 9:15 AM
End Date
4-16-2025 9:30 AM
School
School of professional and Applied Sciences
Department
Economics
Keywords
Finance, economics, investing, trading, momentum, small-cap, large-cap, RSI, technical trading
Abstract
This research paper examines the viability of a momentum investing strategy in the small cap space, using Monte Carlo analysis on momentum-based large cap investment strategies as a basis for comparison. Dorsey Wright’s systematic investment approach combines point-and-figure charting with relative strength calculations to produce a momentum-based investment strategy. Edgeworth Capital Group of Ameriprise Financial implements Dorsey Wright’s momentum-based investment approach into household portfolios invested in the US large cap space. Edgeworth applies the S&P 100 to Dorsey Wright’s matrix, creating a portfolio composed of the top-performing stocks in the matrix. Like the other studies analyzed in this paper, Edgeworth’s “10-pack” strategy has significantly outperformed the market over the period June 2014 – November 2024. This study applied the same trading strategy, Monte Carlo analysis, and time period to the PACER Cash-Cow Small Cap 100 ETF, an ETF composed of the 100 companies in the Russell 2,000 with the highest free cash flow yield. Despite more volatility in the small cap space, the momentum-based strategy outperformed the Russell 2000 index. While the viability of momentum-based investment strategies was well-analyzed in the US large cap space, these findings demonstrate the effectiveness of momentum investing in the broader US stock market, regardless of market capitalization.
Primary Faculty Mentor(s)
Dr. Eric Kyper
Primary Faculty Mentor(s) Department
Business
Additional Faculty Mentor(s)
Dr. Michael Schnur, Dr. Gerald Prante
Rights Statement
The right to download or print any portion of this material is granted by the copyright owner only for personal or educational use. The author/creator retains all proprietary rights, including copyright ownership. Any editing, other reproduction or other use of this material by any means requires the express written permission of the copyright owner. Except as provided above, or for any other use that is allowed by fair use (Title 17, §107 U.S.C.), you may not reproduce, republish, post, transmit or distribute any material from this web site in any physical or digital form without the permission of the copyright owner of the material.
The Viability of Momentum Investing in the Small-Cap V.S. the Large Cap Space
Snydor Performance Hall
This research paper examines the viability of a momentum investing strategy in the small cap space, using Monte Carlo analysis on momentum-based large cap investment strategies as a basis for comparison. Dorsey Wright’s systematic investment approach combines point-and-figure charting with relative strength calculations to produce a momentum-based investment strategy. Edgeworth Capital Group of Ameriprise Financial implements Dorsey Wright’s momentum-based investment approach into household portfolios invested in the US large cap space. Edgeworth applies the S&P 100 to Dorsey Wright’s matrix, creating a portfolio composed of the top-performing stocks in the matrix. Like the other studies analyzed in this paper, Edgeworth’s “10-pack” strategy has significantly outperformed the market over the period June 2014 – November 2024. This study applied the same trading strategy, Monte Carlo analysis, and time period to the PACER Cash-Cow Small Cap 100 ETF, an ETF composed of the 100 companies in the Russell 2,000 with the highest free cash flow yield. Despite more volatility in the small cap space, the momentum-based strategy outperformed the Russell 2000 index. While the viability of momentum-based investment strategies was well-analyzed in the US large cap space, these findings demonstrate the effectiveness of momentum investing in the broader US stock market, regardless of market capitalization.