I've heard of a strategy that involves doing MOC sells on stocks that are up on the quarter, and buy them before the close to get the MOC pop. This involves findinding stocks that are up significantly on the quarter with the idea that funds will look to add them to their portfolio to have their portfolio look good because on their quarterly reports, they can show owning these profitable stocks during the quarter. Has anyone else heard of this or know anything about it? Thanks, Cash
Your idea is far too simple when it comes to the actual trading that occurs at this time of the year for rebalancing purposes. First of all, the Russell Rebalancing takes several days, and doesn't just happen at MOC on the final day of the quarter. Secondly, indexers have to buy stock in the names that are going into the Russell and vice-versa with names that are being dropped. Moreover, you have to do some math in order to figure out which stocks will have the greatest price ramps, like taking a look at the average daily volume that trades, and how many shares need to be purchased by index funds for the index. There's a lot of "gamesmanship" that goes on during this week with the rebalancing, and nothing is an exact science here, since on many occassions big buying by Indexers can get paired-off by the boys upstairs crossing trades for their customers accounts.
Then again, big money is not worried about the 'steenths and eighths, and maybe even quarters that this strategy would seem to be a good setup for. They are thinking about whole number gains, not fractions.
i dont think cashonly was talking specific to russell rebalancing strategies, just quarter ending, or so called window dressing in general. i think both sides of teh coin you guys brign up are right, big money doesnt let themselves be picked off but they dont really care about 10 cents here or 1/4 there
I'm sure there are many ways to play it depending on your style. I was referencing MOC pops and as has been mentioned, the big boys don't mind losing dimes and quarters and I'm happy to pick them up. Anyway, there were a few interesting pops today, but haven't determined a particular pattern for them.
I wonder if there is a correlation with dividend yield. My thinking is that a run-up might be the result of good fundies, and good fundies should mean that the dividend will be paid and not cut.
we have programmed a factor model using balance sheet data and prices to build a market neutral portfolio out of the sp1500 universe. we tested a sharpe ratio of 1.4 between 1998 and 2003. we still do not trade it since we are afraid of biased data, but plan to put it on papertrading soon. our experience that is rather huge effort and things like survivorship bias, index component bias and data quality concerns are key issues for this kind of approach. we have not used earnings forecasts or short interest in the test I referred, two factors that should be quite important. we are going to test teh earnings forecasts soon, using JCF data, but we do not have history on short interest. peace
Avalanche just posted a Mark Hulbert story from CBSMarketwatch on the Window Dressing thread. It is remarkably similar to this topic. Check it out.
its an inefficiency and should be exploited, and at the same keep those guys honest teh way a free market should work