This is the fourth strategy in my series testing whether backtested strategies hold up over extended periods. This one comes from Zura Kakushadze's "151 Trading Strategies" book - specifically Strategy #3.1: Price-Momentum.

What This Strategy Does:

The classic cross-sectional equity momentum strategy. Each month, rank the top 500 US equities by dollar volume based on their past 12-month return (skipping the most recent month to avoid short-term reversal). Go long the top decile (50 winners) and short the bottom decile (50 losers), equal-weighted. Rebalance monthly. Based on Jegadeesh and Titman (1993).

27-Year Backtest (1998-2025):
- Sharpe Ratio: 0.089
- CAGR: 2.155%
- Net Profit: 81.540%
- Max Drawdown: 80.5%
- Win Rate: 51%
- End Equity: $1,815,397 (from $1M)
- PSR: 0.000%

Key Observations:
1. A 0.089 Sharpe over 27 years is noise.
2. 80.5% max drawdown from the 2008-2009 momentum crash.
3. CAGR of 2.155% - worse than Treasury bills.
4. PSR of 0.000% means no statistical evidence of skill.

Lessons: Classic momentum as pure long/short with no risk management fails. The 2008-2009 momentum crash destroyed returns. Needs volatility targeting and drawdown limits.