Emerging Markets Lookback Period Fund Backtest Results Array

May 15, 2019 in Backtest | Emerging Markets

One variable to analyze more deeply is the 'Lookback Period' -- this is the period through which you filter out noise.  You obviously don't chase whatever performed best today vs yesterday (a 1-day lookback)... Nor should you chase whatever performed best over the past 5 years (laggard).   Academia has demonstrated in numerous research papers going back many, many decades over many different asset classes that the 3 to 12 month range is the value-added focus zone.  

Set-Up:  We test Emerging Markets over a 16-year period using both monthly lookbacks {3, 4, 5, 6, 7, 8, 9, 10, 11 & 12 months} --- and then also test weekly lookbacks {13, 17, 22, 26, 30, 35, 39, 42, 48 & 52} weeks.   The monthly tests use last day of month to execute rotation, when there is rotation.   The weekly tests use the last trading day of the week (ie, Friday close).    We use zero interest security (XZERO) as our holding when not invested (this is unrealistically conservative but it allows us to compare [3] month with [12] month lookbacks without the minor complication of changes in fixed-income total returns when out of the market).  

Results:  Generally speaking, emerging markets are better examined through a 4-5-month (17-22wk) range in terms of lookback period.  10-11 month were profitable but far less in total return over this period than the other time periods.    Weekly and monthly time periods show similar results showing that variation will occur – we are only looking for larger tendencies here.   Secondarily, 3 & 6 month (13-wk and 26-wk results) proved better than 9 & 12 month.   

VEIEX_16_Year_Backtest_Array_Slide.pdf (129.62 kb)

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Emerging Markets Index EPS vs S&P 500 Index EPS

Sep 01, 2013 in Earnings | Emerging Markets


Emerging Markets fundamentals as measured by earnings have been very weak.    Will this stay isolated or is it an indicator of weakness that will spill elsewhere?    S&P 500 earnings can be quite resilient to segment weakness -- but stay tuned to see how this plays out as this divergence may also be telling us something:


Source: Bloomberg

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Chinese Yuan vs other 'commodity currencies'

Feb 28, 2010 in Currencies | Emerging Markets

The Chinese Yuan is pegged to the US Dollar --- with occasional 'adjustements' or small revisions by the Chinese government.   This chart shows a general, vague idea of what 'may' be the movement of the currency if it were allowed to float.   Both the Australian Dollar (developed market) and the Brazilian Real (emerging market) are considered 'commodity currencies' and are in a way comparable to China.

To see other timeframes for this relationship,  type CYB BZF and FXA into the text boxes and push the 'Compare Returns' button here:



Using ETFreplays data visualization tools to understand financial relationships -- EEM Focus

Feb 06, 2010 in Emerging Markets

Options market makers use daily volatility as their measure of how to handle securities with different sensitivities to broad events and market moves.   Getting a basic understanding of volatility can be quite useful when thinking about how to weight your holdings.    If you expect high returns, then high volatility is fine  --  you are expecting to be paid for the risk.   A major problem would be owning securities that are very volatile but you do not expect them to offer high returns.  

The Emerging Markets Index (EEM) has been more volatile from a daily standard deviation perspective every month for the last few years.   There has been no change in this in 2010.    Looking at the returns by month as in the first chart shows how this YTD period is hardly an unexpected outcome.

Our layout at ETFreplay.com has been designed to offer visual representation of data.   Financial relationships are much easier to understand with a well laid-out chart than a set of numbers in a data table.



To vary the timeframe of the above analysis and gain deeper understanding of this relationship, visit: ETF Charts


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