Sunday, April 17, 2011

Weekly Summary

It has been a week since my first post on fundamental ranking. Looking back, it appears I've made good progress this week. Below I summarize the key points of my little research.
  • T-Rank 2.0 is a fundamental based ranking system. It ranks stocks purely by their fundamental indicators, including: valuation, financial condition, and return on capital. Growth was not included because it actually has negative impact on the short term return. Blog posts covering this topic are here, here, and here.
  • T-Rank 2.0 is designed for short term trading. If an investor build a portfolio with the top 20 stocks returned by T-Rank 2.0 and rebalance the portfolio every week, his annualized return in the past 10 year is 26.70%. Considering that we have a giant bear market in the past 10 years, this result is fairly good. Related blog post is here.
  • T-Rank 2.0 is effective. Effectiveness is defined as the relation between the rank of a stock and its 1 week return. T-Rank 2.0 returns a numerical rank from 0 to 100. If an investor moves up 10 rank point, his annualized weekly return should improve 1.7%. And the further he pushes up, the better it gets. If he moves from 90 to 100, his annualized weekly return should improve 3.6%. Related blog post is here.
Other interesting observations are listed below:
  • Although T-Rank 2.0 uses weekly rebalance, it actually automatically finds the optimal holding period, which is 6 weeks in average per stock. Related blog posts are here, here, and here.

6 comments:

  1. 向大家问个好! 很怀念以前的好时光.
    我APR20 要先玩一周然后回国, 共一个月. 因为玩的时候不想挂念市场, 目前清仓了.
    祝大家ER 季节发财! ----90ufo

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  2. Re 90ufo,

    Have a nice vacation! :)

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  3. that's good system, will follow, r u going to rebalance every week?

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  4. 厉害啊!仰慕你三次!俺以后常来!:)

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  5. Re 开小差,

    I still didn't decide how to trade this. If I just trade the top 20, I'll rebalance every week. But that might be a little bit too much to others. Anyway, as discussed in a previous post, there is really no real difference on the holding periods up to 6 weeks.

    Actually this is a good topic for in-depth discussion. The major concern is liquidity. I'll put up a post later for this.

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  6. Thanks, I will be here more often

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