Systematic US Equities Investing

I don't know what he means.

But maybe he means this:

http://finance.yahoo.com/q/bc?s=^VIX&t=my&l=on&z=m&q=l&c=

10-12 year cycle?

 

Momentum methods normally have high beta and large drawdown. But it seems that Asness of AQR found a way to reduce the beta. Anyone has an idea about what trick AQR uses?

 

Have a look at what they own. I have no idea myself.

AQR Quarterly Report:

http://www.sec.gov/Archives/edgar/data/1167557/000108514606000385/0001085146-06-000385.txt

 

Pepper John> Here is an article on AQR. Essentially value with momentum although they have apparently figured out a method to value entire countries. Pretty interesting actually.

EDIT: Apparently I can't update the article. I have uploaded it here for a few days: http://aeroscapital.com/AQRarticle.pdf

 

Thanks for the link. How to tell which they are long vs which they are short?

 

Thats something Im not sure about. As I understand it, Companies don't have to report short positions.

Puts and Calls however are shown.

 

Thanks. It is interesting.

 

Starting next month I shall be able to provide a hedged basket. I have basically developed a short strategy which compliments the long-only model. It can be classified as a contrarian strategy.

The results shall be based on a 50% long and 50% short, unleveraged portfolio. The monthly volatility of the returns decrease remarkably. The standard deviation of returns on the hedged portfolio is 3.58 vs 7.15 for the long-only.

Disclosure: I shall be managing my small live portfolio in that style.

Here are performance stats (hedged model tested from 1989-2005):

One month:
Average return: 2.11%
Max. return: 22.07%
Min. return: -11.08%

One quarter:
Average return: 6.44%
Max. return: 37.18%
Min. return: -7.05%

One Year:
Average return: 28.05%
Max. return: 102.51%
Min. return: -7.85%

As for the long-only model here is the performance figures for June as of now:

Model: -4.39
S&P 500: -2.78%

Since start of journal:

Model: +0.76%
S&P 500: -3.65%

 

solid 1.5-2.5 % a month is very achievable in Index dispersion strategy . If you chose DOW , your universe is only 31 stocks. One can easily manage even a full replication of Index. There are a few nuances of course , but once certain rules are established , its become a routine process .

 

So you mean dispersion as in vol arbitrage? For example, short options in the index and long the components? Isn't that field too crowded so that the edge has been exploited (index options are now fairly valued instead of being more expensive than the stocks)?

Or am I completely misunderstanding you?