are you familiar with portfolio attribution module ? You can continue to stay long only , BUT introduce three layers ( from top down): 1. Macro outlook ( cash ) 2. Asset allocation ( sectors ) 3. Stock picking Obviously your portfolio won't be $ equal anymore and you have to wear a lot of hats ( lol)
Yes I am familiar with it. But the problem is wearing that many hats... I only have one head at the moment! I could try to consider a strategy of that nature if this was my full time occupation which sadly its not. It seems like a nice style though (I like analysis, top down is best as bottom up is rather mundane at times).
Regarding your backtested results, does your analysis properly account for corporate actions? Were delisted stocks included in your analysis? See the appendix on data integrity in the following paper for reference: http://www.market-trends.net/downloads/Does_trendfollowing_work_on_stocks.pdf or http://www.drsmarttrading.com/Does_trendfollowing_work_on_stocks.pdf Also, are you certain that your fundamental database doesn't have backfill bias? Does IT contain delisted stocks? This is a very typical stumbling block for backtesting on equities. How are you faring currently? We are entertaining a pretty good drawdown right now. Good luck.
I am still here. Not much to do when there is a once a month rebalancing model lol. ecritt> Yes all those were taken into considerations. I just took a look at the universe and one of the stocks, World Airways, which has changed its tickers from WLDA to WLDAE to WLDA.PK (at the moment) has been accounted for. I have also seen the case for a few other stocks as well. The database essentially has snapshots of the equity universe at a weekly interval since 1989. Thus, whatever the universe shows for a certain periods is exactly what I would have acted on. As for the model its taken a sizable hit as well. Two of the positions have plummeted (AP and HANS). The return for june as of now is under -5% with the index under -2%. Not the best of times but such drawdowns will naturally occur. I have looked at that Blackstar report previously myself. I have looked into momentum strategies (the current model is simply an offshoot of this as it combines momentum with fundamental concerns) and found them profitable. Here are exact performance figures: For the month of June (as of now): Model: -5.88% S&P 500: -2.17% Since start of the journal: Model: -0.81% S&P 500: -3.05%
M2 , why would an obviously talented and hard working guy like you wasting time with those worthless papers called stocks ? Are you getting paid to outperform "benchmark" by using your clients money ? If not , are ready to invest your(family) money and be depending on incompetent FED , crooked CEO , criminal WS analysts and horrible purity of earnings to make money in FA? Put your efforts in option's knowledge and never look back. And I'm not saying it because your PnL is currently flat ; I would of make the same statement if it was 30% up too. Take care.
Thanks for the compliments. No, I am not paid by clients for this and overall this new foray into equities is a net negative one (for my account). I understand your concerns about equities but I still find the field to be interesting which is the reason why I still like to play with it. Its more of a side show really as much of my work focuses on FX (both discretionary and systematic). I basically had all this fundamental data handed to me so it seemed to me to be a waste not to tinker with it. I have been talking to risk for a while and have been picking his brain about various options strategies. I have done a few trades as well but my understanding is still intermediate at best. I am spending a considerable time to gain more knowledge in that field to confidently trade it more actively.
Well in the strictest sense, volatility typically rises in anticipation for the earnings announcements before decreasing after the event. After that its a gradual increase again. So in a sense that is a cycle. Is that what you meant or is there an even greater meaning to it all ?