New strategies:
#211 – Market Timing Strategy Based on Principal Component Analysis
Period of rebalancing: Daily
Markets traded: equities
Instruments used for trading: futures, CFDs, ETFs
Complexity: Very complex strategy
Bactest period: 1998 – 2008
Indicative performance: 22.19%
Estimated volatility: 12.33%
Source paper:
Duran, Bommarito: A Profitable Trading and Risk Management Strategy Despite Transaction Cost
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1509811
Abstract:
We present a new profitable trading and risk management strategy with transaction cost for an adaptive equally weighted portfolio. Moreover, we implement a rule-based expert system for the daily financial decision making process by using the power of spectral analysis. We use several key components such as principal component analysis, partitioning, memory in stock markets, percentile for relative standing, the first four normalized central moments, learning algorithm, switching among several investments positions consisting of short stock market, long stock market and money market with real risk-free rates. We find that it is possible to beat the proxy for equity market without short selling for S&P 500-listed 168 stocks during the 1998-2008 period and Russell 2000-listed 213 stocks during the 1995-2007 period. Our Monte Carlo simulation over both the various set of stocks and the interval of time confirms our findings.
New research papers related to existing strategies:
#14 – Momentum Effect in Stocks
#25 – Small Capitalization Stocks Premium Anomaly
#26 – Value (Book-to-Market) Anomaly
Israel, Moskowitz: The Role of Shorting, Firm Size, and Time on Market Anomalies
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2089466
Abstract:
We examine the role of shorting, firm size, and time on the profitability of size, value, and momentum strategies. We find that long positions comprise almost all of size, 60% of value, and half of momentum profits. Shorting becomes less important for momentum and more important for value as firm size decreases. The value premium decreases with firm size and is weak among the largest stocks. Momentum profits, however, exhibit no reliable relation with size. These effects are robust over 86 years of U.S. equity data and almost 40 years of data across four international equity markets and five asset classes. Variation over time and across markets of these effects is consistent with random chance. We find little evidence that size, value, and momentum returns are significantly affected by changes in trading costs or institutional and hedge fund ownership over time.
#140 – Ramadan Effect
Almudhaf: The Islamic Calendar Effects: Evidence from Twelve Stock Markets
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2131202
Abstract:
This paper investigates the Islamic calendar seasonal anomalies in the stock returns of twelve countries where the majority of the population are Muslims. We show empirical evidence of statistically significant Islamic calendar seasonal effects in all twelve countries of our sample. We document evidence of positive and statistically significance returns in the month of Ramadan in Jordan, Kuwait, Pakistan and Turkey. Our results provide some evidence against market efficiency.
