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Exponential moving average filters (EMA) are another common type of filter used to filter price data for stocks, bonds and other assets. EMAs are infinite impulse response filters where the current filtered output is dependent upon all of the previous price values. With the EMA filter the impact of earlier data on the current filtered value falls off at an exponential rate. The exponential decay of the impact of earlier data may be fast or slow and is characterized by the

Momentum investors typically use a filtered version of price to help them determine if an asset has positive or negative momentum. A standard filter is the 10-month Simple Moving Average (SMA10). The asset is held if the price has positive momentum (above the simple moving average) or sold if it has negative price momentum (is below the simple moving average). Is a SMA10 the best choice of filter? How does overall momentum investment performance vary with filter length? Bel

We saw in the blog post "Using A Simple Moving Average Filter Used As An Investment Indicator" that investing only during periods of positive price momentum and holding cash equivalents during periods of negative price momentum can potentially improve performance and lower volatility. Below is return data from 12/31/71 through 12/31/2017 comparing buying and holding the S&P 500 versus moving assets to cash equivalents during periods of negative price momentum (as determined b

Many investors use the 10-month simple moving average filter as a momentum indicator. Mebane Faber in his book the Ivy Portfolio showed that an investor can possibly improve performance and lower volatility by investing during periods of positive price momentum, that is during periods where the price is above the 10-month simple moving average. During periods of negative momentum, when the asset price is below simple 10-month moving average filter, assets are held in cash eq

A simple Moving Average (SMA) is one of the most common filters used on stock or asset price information. The primary use for the filtered data is to reduce or eliminate high frequency price fluctuations in order to visualize the overall trend and also used as an indicator of price momentum. When used as an indicator of price momentum, the asset has positive momentum when the asset price is above the moving average and negative momentum when the asset price is below the mov