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Nick Ray's Latest Blogs

If you wanted to put a trailing stop under your stocks to allow them room to be volatile but to get you out before real trouble appears, where would you put it?  For many people -20% seems to be a 'safe' choice. It is away from the day-to-day noise and by the time you are -20% down it feels as if any further would start…

This website provides a very useful summary of a stock's performance in terms of three numbers: the Quality rank, Value rank and Momentum rank. However my testing suggests that the Value rank needs to be treated with caution. These plots show LR (Likelihood Ratio) against rank. Values of LR greater than 1 indicate a probability greater than 0.5 that the stock will have a positive…

Nick Ray's Latest Comments

This is a good example of why a log scale is preferable to a linear scale when trying to assess a price chart for a stock. A log scale converts the "drift" or expected rate of return into a straight line which makes it easier to see. The linear scale for Next (LON:NXT) looks like this (I have added yellow lines to show trend) The…

This is roughly equivalent to saying buy when FTSE100 is higher now than it was six months ago. It is a simple momentum based indicator with a six month lag.

R and ggplot2 I think! Not sure if you are trying to predict quality from location or deciding where to base your HQ though. :-)

If you are choosing stocks from UK and European markets you are not using the same "beta" for each stock. In fact, even if you restrict yourself to the UK the beta is calculated using a different index for different stocks. Personally I am not convinced that beta is a good indicator anyway. It comes at the end of a long chain of reasoning from…

Your comments caused me to do a bit of googling to see what the "mean-variance" gang have to say about drawdowns. It turns out that the seminal paper is "Optimal Investment Strategies for Controlling Draw-downs" by Grossman and Zhou in 1992 but since then the ideas have been refined considerably. The short version is that you choose a "maximum drawdown" you are prepared to accept…

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