Methodology

How the backtest works

ETF Rotation Lab currently tests one focused rule: monthly ETF momentum rotation. It is designed for education and historical research, not investment advice.

Data

• Uses daily adjusted close values downloaded from Yahoo Finance and stored locally as static data.
• Supported ETFs in the current version: SPY, QQQ, IWM, EFA, EEM, TLT, IEF, SHY, BIL, GLD, VNQ, DBC.
• ETFs are only used after their available history begins. The app does not invent earlier prices.

Strategy Rule

• At each monthly rebalance date, calculate each selected ETF's lookback return.
• Rank ETFs by momentum and hold the top N with equal weight.
• Hold until the next monthly rebalance.
• The current version assumes a 0.05% transaction cost when holdings change.

Limitations

• Backtested performance is hypothetical.
• Past performance does not guarantee future results.
• Taxes, bid/ask spreads, market impact, and investor-specific constraints are not modeled.
• The current tool is not a real-time data product and does not provide buy or sell signals.

Disclaimer

For educational and informational purposes only. Not investment advice. Backtested performance is hypothetical and does not guarantee future results. Users are responsible for their own investment decisions.