Jan 23, 2019 ETFreplay Market-Generated Information (MGI) Report

Jan 23, 2019 in Ratio | Stocks

 Jan 23, 2019  ETFreplay Market-Generated Information (MGI) Report

Focus on FedEX (FDX) as a backtest parameter.

(Click on Image For Link to PDF)


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Jan 17, 2019 ETFreplay Market-Generated Information (MGI) Report

Jan 17, 2019 in Stocks | Ratio

Jan 17, 2019  ETFreplay Market-Generated Information Report:  A look at where we stand with some key Financials including a backtest: 

 (Click on Image For Link To PDF)


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The Nikkei has been flat for a LONG time. Yes so have lots of securities. Example: Micron MU.

Jan 07, 2019 in Channel | Stocks

 A classic argument you hear is that the Nikkei (which went exponential in the 1980's) has been dead for a generation.   Yes, but you could say the same thing about lots of securities.   Here is EWJ (Japan fund) -- flat this century vs a very simple tactical strategy... and Micron (MU), which is actually -16% this century. If the S&P 500 goes into a wide trading range with low Buy & Hold returns, tactical asset allocation can still work. Even when there is no wind ON AVERAGE over the long-run, tactical investing can augment returns with the intermediate-term gusts.






Note that in these examples the backtest is extremely conservative in that it assumes you never earn any return when out of the stock, which can be lengthy periods of time. In reality a bond fund or similar relatively low risk yield fund is very easy to access. Use our Ratio Moving Average backtest and check the results on those. Ratio Moving Average Backtest Module (Members link)

 ETFreplay Summary Page -- Individual Stocks

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Index Funds & ETFs Are Making Stocks Go Up With Their Senseless Buying? Oh Really?

Nov 11, 2018 in Stocks

Only looking at 4 top index funds that have been strong BUYERS of GE stock ---  to the tune of +223 million shares since 2010.


GE_SHARES.pdf (286.44 kb)


Started end of 2010 because that is the year VOO (Vanguard S&P 500 ETF) began trading.

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Survivor Bias

Aug 19, 2012 in Backtest | Stocks

Survivor bias is a real problem in individual stock backtesting.   A quick statistic:   ~30% (90 / 308) of the stocks in the DJ Financial services index on Dec 31, 2007 have since been removed from the index.     

Said another way, if you were running a stock backtest using all of the current individual stock components of this index as a starting point to backtest today, you would have a massive positive bias in your study.   Your list would not include names like:   

Wachovia (failed bank), Merrill Lynch (likely insolvent in 2008),  Fannie Mae (insolvent), Lehman Brothers (bankrupt), Washington Mutual (failed), Bear Stearns (insolvent), Countrywide (BofA acquisition disaster), MF Global (bankrupt) etc...

Nearly 1/3 of the list is gone. That is a TON of survivor bias.

Back up a few years and it was names like Worldcom (bankrupt), Enron (bankrupt), Global Crossing (bankrupt) along with all the other Tech, Media & Telecom (TMT) companies that lost -98% of their value and were removed from their respective indices.

Of course, if you operate at a level of long-established indices (as with ETF backtesting), you can largely avoid the survivorship bias problem as the historical index data reflects all of the securities that left the index due to bankruptcy and/or similar resons.   That is, while the DJ Finanicals Index no longer has those 90 companies in the index -- the index RETURN of course does indeed reflect the effect of all those failed/insolvent firms.   Survivorship bias is no longer relevant if using established index ETFs. This is one key benefit you get with using securities that actually traded at the time --- and not just theoretical indices (an index is NOT an investment, an index FUND is what you invest in).

The issue in ETFs is that of newly-created indices that were created only to sell a financial product.   Many of these are going away and the ETF analyst should differentiate between what is a 'real' index and what is a financial gimmick. Does anyone think that the S&P Financial Sector Index isn't going to still exist in 10-20 years? It will. MSCI Emerging Markets -- yes it will too.

New important indexes do come along -- but you should be discerning in this and really focus most of your efforts on long-established indices. Learn about new ETFs as part of your efforts -- but spend 95% of your time on what is already out there.

RIP these Direxion ETFs: Direxion Decides To Close 9 3x ETFs

Note also that having valid indices is no guarantee that YOU will be the provider of choice --- Russell Investments is giving up on its ETF effort after starting far too late and hence gaining virtually zero traction in the marketplace: Russell Pulls Plug On ETFs


See Also: New ETF Tracking Error Nuances

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