My ranking is good or need revision ?

P123 Experts

I have designed this value rank on smallcap 6 months ago;
it looks underperforming for last 1 month and last 3 months.

Whether, still this rank is good or i need to revise.

Here, I am posting screen shot of rank performance.

This chart universe is 50M to 1B marketcap with exclude negative ROE, etc., and 700 companies in this universe.

Thanks
Kumar










Hi Kumar,

Could you post a long-term histogram with 200 buckets and 0.25 slippage?

That’s what I look at most often.

Best,

Walter

I run with 200 buckets and 0.25 slippage.
My screen level membership allows to run from Nov 2008.

Please, suggests
whether this ranking system still good; or need to re-design ?

Thanks
Kumar


Seems good to me so far. What kind of liquidity filter do you have against the Universe?

Here, is the liquidity filter in the universe

Thanks
Kumar


Hi Kumar,

My 2 cents:

  • your universe seems small with only 700 stocks
  • the high performance of your top bucket suggests that the ranking factors were ideal for 2009-2014, but perhaps not before or after.

The only way to answer that is to upgrade so you get access back to 1999. I usually test a ranking system for two time intervals: 1999-end 2006 and 2007-today. Performance should be approximately the same in both periods to qualify as a good ranking system.

Also, it is important to consider what buy rule you have. A simple ranked-based rule is probably best, or otherwise none at all, such as my 7sisters KISS R2G.

Happy ranking!

If you want real help, then give a link to your public system so people can see what is going on without playing 20 questions.

No system will work as well as your top quantile in all market regimes. The high returns in your system do not come smoothly like a bond coupon. The Annualized Returns histogram is nice but the better analysis is done with the downloads of the Performance line plots.

With respect to the micro cap space you are targeting, the weaker performance is a combination of decreasing risk preference and illiquidity that are the flip side of a small cap bull market.

Also, the further you get into the tail of a universe by holding only a few stocks, the higher your volatility is likely to be.

Agree w Shaun. Microcaps have exaggerated returns on the way up and down and lately the direction has been down. Your charts reflect this.

Hi Kumar,

Your ranking system did better than I expected.

You may want to look at your universe. I ran a custom series against this;

UnivSum("Universe(NOOTC)=True & Universe($ADR)=False & MktCap>50 & MktCap<1000 & AvgDailyTot(20)>200*1000 & AvgDailyTot(30)>200*1000& AvgDailyTot(60)>200*1000 ","MktCap")

And the universe appears to be in a secular decline for the last 10 years.

Walter

Walter,

Thru screen performance this universe looks good and align with S&P 500.

Believe, the series measure market capitals of this universe is
may not be appropriate to measure the performance of this universe.

Thanks
Kumar




Kumar,

It would be better - but not perfect - to use the S&P 500 Eq weight index. But you’re right that the equal weight simulation mirrors the S&P 500 Eq weight index. I’ll need to think about the meaning of the custom series curve. I’m thinking about it as a cap-weighted index. Maybe that’s wrong.

Walter

Sevensisters, Walter, Shaun & sgmd01

Thank you for your feedback and suggestions.

  1. I have narrowed my universe with 700 stocks by following
    expert Mgerstein method apply the screen logic in universe, don’t keep plain white paper on the universe.

I need to wait for 6 to 12 months performance rather than 3 months performance.

I have run the ranking for Summer months; it stays relatively good.

I welcome other suggestions for testing this ranking system.

Thank you for sharing knowledge.
Kumar