Tuesday, April 12, 2011

T-Rank 2.0 And Impact Analysis

I played with it a little bit and finally decided to remove the entire growth category. I also tried to tweak the weights of the remaining three components, but it turns out that the original assignment gives the best performance. Below it's the final setup of T-Rank 2.0:
  • Valuation, 2/5;
  • Financial condition, 2/5;
  • Return on capital, 1/5.
Impact analysis is conducted as well and results is listed below. The order of significance didn't change. Valuation still comes first, then comes financial condition, and return on capital comes last. Nonetheless, the impact of return on capital is a nontrivial 6.48% annualized return. An interesting observation is that the impact of the components roughly matches with their weights, 15 to 12 to 6.5 is about the same ratio of 2 to 2 to 1.

Lastly the performance chart.

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