# Frequently Asked Questions

ETFreplay.com is a research, analysis and backtesting website for Exchange Traded Funds.

ETFreplay’s tools are designed to allow investors to find, test and pursue a robust and repeatable process for gaining exposure to up-trends while avoiding large drawdowns.

An investment process is a set of well-defined steps undertaken in a consistent manner to create and maintain an appropriate portfolio designed to meet your investment goals. A good process balances the need for a level of return with the risk of loss (drawdowns).

ETFreplay covers more than 98% of all U.S. ETP (Exchange Traded Product) assets and we routinely add new ETFs.

However, before adding new funds we require that they have approximately $100 million in assets or at least sufficient asset momentum that $100 million will be reached in the near future.

This requirement is necessary because if an ETF doesn't trade volume then the closing price will not accurately reflect the underlying index, which in turn will compromise any backtest results.

We generally assume that investors have their own ideas on which asset classes, sectors, countries, regions or industries they want to monitor.

However, if you are agnostic about the universe of ETFs, portfolios with a good broad mix of asset classes, such as the well known Permanent Portfolio, Ivy Portfolio or our own Sample portfolio provide a good starting point.

Once this defined universe is in place, the tools on ETFreplay can be used to find, test and pursue a robust and repeatable process for gaining exposure to up-trends while avoiding large drawdowns.

Yes, all returns and calculations (including moving averages) on ETFreplay are Total Return, which accounts for the receipt and reinvestment of dividends and distributions.

We only use trading days and start with the convention of 252 trading days per year, therefore:

6-months is 252/2 = 126 trading days

3-months is 252/4 = 63 trading days etc.

This means that when, for instance, 3-month returns are chosen on the Screener, the calculation will always count back 63 trading days, making comparisons over time consistent.

The ETF Screener is a statistical model loosely based on the Sharpe Ratio, which measures reward per unit of risk. The Screener takes this concept and decomposes it into three separate factors:

- Higher timeframe total return (ReturnA)
- Lower timeframe total return (ReturnB)
- Volatility

- Set ReturnA to '6-Months' and set its weight to 100%
- Set the weights of ReturnB and Volatility to zero
- Click 'Run Model'

The full process employed by the Screener to rank ETFs is explained in How The ETF Screener Works (*subscribers only*)

Volatility is the annualized standard deviation of daily returns.

i.e. 20-day Volatility is the standard deviation of the past 20 1-day returns multiplied by sqrt(252) (annualized).

Volatility is a measure of risk. Risk is uncertainty and the larger the range of possible outcomes, the higher the volatility will be and therefore the greater the risk. This tends to be borne out when it comes to drawdowns, with higher volatility securities typically experiencing larger drawdowns than lower volatility ETFs.

ETFreplay has several tools to help investors visualize risk, including:- Monthly Returns

*View what sort of monthly return is to be expected for the ETFs in your portfolio and what constitutes an outlier* - Down Day Stats

*See how the ETFs in your portfolio have performed when the broader market has had a bad day* - Return vs. Volatility

*Evaluate the risk / return performance of the ETFs in your portfolios over any time period* - ETF Volatility

*Compare the rolling realized volatility of up to five ETFs*

See also Volatility blog posts

- simple moving averages (SMA)
- calculated using Total Return

i.e. they include not just closing prices but also account for the receipt and reinvestment of any dividends and distributions. Accounting for dividends is necessary otherwise you don't get the full picture and it leads to faulty comparisons between those ETFs that pay dividends and those that do not.

See Total Returns vs. Price Return

The length of a moving average indicates the number of data points it includes.

i.e.

a 10-month MA contains 10 data points - the month end total return values

a 200-day MA contains 200 data points - the daily total return values

While these two MAs cover a similar period of time, they are not exactly the same.

A few index mutual funds have been added to fill in spots that don't have 10-15 years of data available, like many ETFs do. The list of index mutual funds can be found by clicking on the 'Symbols' link when entering tickers on various pages.

Note: These index mutual funds can be used for longer-term backtesting. For shorter-term backtesting (daily, weekly or semi-monthly rotation / update schedules) users should really stick to ETFs rather than mutual funds - due to the way that fixed-income mutual fund accounting does not embed accrued interest in the NAV.

There is an entire field of study devoted to behavioral finance. All people suffer from various biases that can range from overconfidence to fear. Adding a quantitative component to your overall process helps by offering an objective view. This does not mean you MUST follow your model --- backtesting and models in general should be used as key inputs to your overall research process. Good judgment will always be a part of balancing reward and risk.