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Livermore Active Issues Index for Friday, April 15th

April 15, 2011

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6 Comments leave one →
  1. John permalink
    April 15, 2011 4:37 pm

    David,

    Do you have any comments on the performance of the Livermore Index to this point? Are you satisfied? Disappointed? Indifferent?

    It seems that it didn’t outperform QQQ nearly as much as expected (based on the backtests) in 2010. Perhaps this year it will do better? Or has some of its edge possibly been compromised due to the high correlation between stocks right now?

    • Andrew permalink
      April 16, 2011 3:38 pm

      On a related note, is the performance beta-adjusted with that 1.2 figure I saw mentioned on here?

      • david varadi permalink*
        April 19, 2011 1:16 am

        hi andrew, we do not beta-adjust performance because beta itself is a highly unstable measure. however, we do look at the risk-adjusted returns of the hedged portfolio instead which is more accurate.
        best
        david

    • david varadi permalink*
      April 19, 2011 1:14 am

      hi john, i think that i would have to say that i am somewhat satisfied with performance to the extent that any reasonable alpha in the large cap space for a low turnover strategy over a long time frame is an accomplishment. while our institutional models did considerably better, they too underperformed the backtests. I think that you hit the nail on the head when you suggested that correlations were responsible. This factor has hurt all cross-sectional momentum strategies, and no one was spared. However that said, like volatility in 2008, correlations also tend to mean-revert over time, and I expect that in a few years we will see a restoration of favorable conditions once again.
      good comments,
      best
      david

  2. April 17, 2011 9:45 am

    After using this list for a year, the Liv. Active Issues index seems to be accurate in identifying some good momentum leaders. As the “underperformance” of the “hedged” portfolio vs. the QQQ over this time period may be a fluke ( and it might “catch up” to it’s mean performance in the future ), my market timing indications and years and style of portfolio management experience told me to not be “hedged” short against the portfolio starting in Sept. This helped me outperform the “hedged” index over the period.
    Looking forward, I am utilizing further trade and stop loss management techniques in the attempt to “hold” some momentum winners longer such as BIDU, PCLN ( even if they “drop off” the index list ) ; techniques that have worked successfully for me in the past, … Good luck trading!

    • david varadi permalink*
      April 19, 2011 1:17 am

      hi con sys, i would have to agree with you—some of the picks have been pretty good, and certainly some timing would have helped things more in the recent time set than would typically be the case over long periods of time.

      best
      david

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