Traders seek to find the next BIG think ala Apple, Bidu and co. Often times this desire is founded by the underlying assumption that taking higher risk is rewarded with higher returns. Furthermore many traders believe in an efficient market where as one can outperform the market only by taking above average risk. However this hasn’t been the case for the US stock market over the last couple of decades or so. A lot has been written about the low-volatility anomaly in financial markets. With this post I want to share some insight how this works out on index stocks over various time frames.
The impact of survivorship bias
November 23, 2011 By 6 Comments
This post is about the impact of survivorship bias on various types of strategies. I want to look at mean-reversion as well as trend-follow strategies to see how their performance gets impacted by using today’s stock index constitution vs. a historical correct definition aka survivorship bias free.
SPY: Is the time about right for mean reversion?
November 17, 2011 By 10 Comments
The 2-day mean-reversion trade, e.g. RSI2 or DV2 has become very popular. Though the performance of this trade has weakened lately (during 2011). So the twenty thousand dollar question becomes: Is the edge of this trade gone or is it about to resume?
With this post I want to share an observation I’ve made by tracking my Trend Strength Indicator (TSI). TSI is a non-directional trend strength indicator. A lower TSI is indicating a tendency to mean-reversion while a higher TSI is indicating follow-through action. Read more about TSI [here].
Portfolio Trader – Week 44 / 2011
October 30, 2011 By 1 Comment
These are the trades I’m going to take for the coming week. In case you consider mirroring my trades make sure you do your own homework upfront in order to match your personal risk profile (no investment advice).
- Frank
Recent Comments