Thursday, June 23, 2011

Introducing Risk Appetite Spread

What is Risk Appetite Spread? Denote R(x) to be the fundamental rank of an ETF. Risk Appetite Spread is
((R(IWF) + R(IWO)) /2 + R(SLY)) / 2 - ((R(IWD) + R(IWN)) /2 + R(ELR)) / 2
Where (R(IWF) + R(IWO)) /2 represent the fundamental rank of growth stocks, R(SLY) represent that of small caps. The average of these two represent the fundamental rank of risky assets. (R(IWD) + R(IWN)) /2 represent the fundamental rank of value stocks, R(ELR) represent that of large caps. The average of these two represent the fundamental rank of safe assets. In theory a high RSA indicates that risk appetite is on and will add fuel to a bull market.


Where is RAS? It is located to the lower right corner on my blog. Similar to Sector Rank Spread, RAS is calculated and updated every weekend.

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