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avkale
Advanced Member

UNITED STATES
Joined: Jan 11, 2006
Posts: 35
Status: Offline

Something is not right

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I created a single factor Ranking System (RSonly). The single factor is 13 week price change. The system is public.

When I ran the performance for 5 years, for universe of SP 500, each bucket outperforms SP500!

http://www.portfolio123.com/rank_perf_show.jsp?StartDate=03%2F22%2F03&EndDate=03%2F22%2F08&freq=2&univ_list=19114&naselect=0&no_buckets=20&min_price=0.0&sector=0&chartType=bar&width=500&height=500&generate=Show+Graph&universe_val=SP500+Index&sector_val=ALL

[Mar 25, 2008 4:47:19 PM]

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olikea
Advanced Member

UNITED KINGDOM
Joined: May 6, 2006
Posts: 692
Status: Offline

Re: Something is not right

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This is because the buckets are equal weighted and the S&P500 is cap weighted, the two do not have to average to the same.

This sort of problem can only be solved by using custom benchmarks, such as the ability to create a benchmark of equally weighted stocks: However, such a benchmark would require regular rebalancing (unlike a cap weighted benchmark that requires no trading). I created a feature request, feel free to vote on it:

http://www.portfolio123.com/feature_request.jsp?featureReqID=558

[Mar 25, 2008 4:55:29 PM]

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