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yuvaltaylor
UNITED STATES
Joined: Apr 11, 2015
Post Count: 2600
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Re: New P123 sample aggregate series
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It turns out I was incorrect in my explanation. It now occurs to me that UnivCapAvg("Close(0)>1","Close(0)/Close(1)") weights the stocks AFTER the daily price move, while what actually happens in real life is that the stocks are weighted BEFORE the daily price move.
Let's use my previous example again. Let's say there were two stocks in the universe, one with a market cap of $800 and the other with a market cap of $200, and the first went up to $900 and the second went down to $100. The index would not change. But if you take UnivCapAvg("1", "Close(0)/Close(1)"), you would be weighting them at their CURRENT weights, not their weights yesterday. So you would be looking at the sum of 0.9*12.5% + 0.1*-50% = 6.25%, while what has really happened is 0.8*12.5% + 0.2*-50% = 0%. This is why the series is NOT a good approximation of the S&P 500.
Yuval Taylor Product Manager, Portfolio123 invest(igations)Any opinions or recommendations in this message are not opinions or recommendations of Portfolio123 Securities LLC.
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