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Portfolio123 » List all forums » Forum: Screener » Thread: Using Industry averages in screening |
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Total posts in this thread: 11
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fxq
Advanced Member
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I agree that one should narrow the Universe of stocks to eliminate penny stocks because they can skew results in historical screening. I am wondering if these same penny stocks are making my comparisons against Industry averages invalid. For example if a penny stock has a TTM EPS growth rate of 6000% it is going to screw up the Industry average TTM EPS growth rate. To make the industry averages useful and valid I would hope the averages are calculated on the fly and use only the stocks which are in the specified Universe. Same when doing historical screening. It that how the averages are calculated? |
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fxq
Advanced Member
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I wanted to verify whether I could trust the reported industry averages. I focused on the Air Courier industry which return 5 stocks in the database. The current ratio (quarter) for the Industry was reported as 1.15, but if I average the individual stocks CurRatioQ I get 1.31 which is 14% off. Should I really trust any of the Industry Averages? Mark |
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marco
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The industry averages are calculated by Reuters (for now), so it's out of our control. We've tried to reproduce their averages as well but we were never quite able to reverse engineer their algorithm. It's not a straight forward market cap weighted algorithm. We know that ADRs are not included, but there are other rules which we are not aware of. We've asked in the past how it is done exactly, but we never got a straight answer. My guess is that the original program that calculates the averages is not well documented and the programmer that implemented it is probably no longer there. We plan to implement our own algorithms in the future so we have complete control, but for now we have to trust their implementation. ---------------------------------------- Portfolio123 Staff |
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fxq
Advanced Member
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Thank you for the reply marco. Here are my suggestions for implementation and enhancement for your future consideration. No need for a market cap weighted industry average, I think a simple average would be fine. And calculate the industry average on the fly and use only those stocks in the currently selected universe. Mark |
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richardnfrank
Member
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I too would like non capitalization weighted industry averages. |
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DennyHalwes
Advanced Member UNITED STATES Joined: Apr 28, 2004 Posts: 1532 Status: Online |
I would also like non capitalization weighted industry averages. However, it is relatively useless for the average to include the results of Penny Stock that can badly distort the average of the stocks that I would like to buy. For example, a penny stock that increased 500% in one month can change the average of an industry with only a dozen stocks from a -5% to over + 20%. That value is not only useless to me, but also can create a very misleading Sim or Port. So we would need a way to screen out stocks that are not in our selected Universe of stocks. Then take the average of the remaining stocks in the industry. I have no idea how you would Implement that. Without this capability I will continue to use the Reuters’ approach with its "not a straight forward market cap weighted algorithm". At least this way the penny stocks effects are reduced to a far less misleading average. Denny  ---------------------------------------- "The significant problems we face cannot be solved at the same level of thinking that we were at when we created them". Albert Einstein |
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richardnfrank
Member
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Since I buy penny stocks I don't want the effects of penny stocks minimized in the averages. |
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DennyHalwes
Advanced Member UNITED STATES Joined: Apr 28, 2004 Posts: 1532 Status: Online |
Richard, If P123 can implement Industry average the way I suggested “So we would need a way to screen out stocks that are not in our selected Universe of stocks” you will be able to use “All” for your Universe (or any other way you wish to define your Universe). That way the Penny Stocks can be included. Denny ---------------------------------------- "The significant problems we face cannot be solved at the same level of thinking that we were at when we created them". Albert Einstein |
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Capnpaul
Advanced Member
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FWIW The first gateway filter my watch lists must pass, is the Industry Group Relative Strength Rank above 50. I have to update a IBD custom list daily in order to do this. We should have the capability to accomplish the same within P123. |
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fxq
Advanced Member
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Hi, Has any further software development been done for the algorithm which calculates Industry averages as discussed in the prior entries in this thread? Thanks, Mark |
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Re: Using Industry averages in screening
