Correction: How to Make More Returns on REITs

I want to thank Geoffrey Ching for spotting an error in my post How to Make More Returns on REITs.  He even came up with what I did wrong; my signal was off by one month, producing returns way too good to be true.  So is the strategy wrong?

No.  It’s still a good strategy, just not astounding.  Here’s the double quintile for mortgage REITs:

And for equity REITs:

Here’s the return graph for equity REITs:

And that for mortgage REITs:

It feels intuitively right that Mortgage REITs don’t beat equity REITs, even with a better strategy for both.  The momentum strategy boosts  the returns on mortgage REITs from 5.1% to 11.1%.  For Equity REITs it moves from 12.0% to 14.0%.

I don’t wonder at this result.  Indeed, my shame is that I didn’t probe the last result more.  This is still useful for those who would pursue momentum, just not as useful as the first article.  And with that, I apologize to my readers for my prior error.  It is my policy to correct errors once I am convinced of them.