Nick Ray

An examination of H2 2018 Anyone who was invested during 2018 cannot have failed to notice that everything was going really very nicely until about September - and then everything fell off a cliff. Interestingly, NAPS2018 seemed to start to show weakness from about June 2018, but the rest of us caught up later and eventually the stocks which seemed to have the highest momentum…

One of the simplest models of stock prices is geometric brownian motion (GBM). This model gives rise to the idea of characterising a stock's performance by its mean annual return and volatility - which most of us are very familiar with. But do we have a good grasp of what different values for volatility feel like? How much volatility are we comfortable with in a…

Here is a chart of the deciles of performance across all shares with a market cap greater than about £80M Year-to-Date: The big drop in sentiment occurred in October but we can see that upward progress had begun to stall from June onwards. Now what is interesting is to compare your own portfolio against these deciles and characterise its performance in terms of the percentage…

(Looking at the behaviour of stock fundamentals beyond two sigma.) Motivation The genesis of this post was watching all the high-QM low-V stocks diving in the recent fall. All the backtest data says that you can't have too much quality or momentum when times are good. But how much is too much when things get a bit tricky?Some time ago I wrote a post about…

Something happened in June Many of us running a rules-based portfolio have noticed a recent slump in performance since June which has also afflicted the NAPS portfolios which are well documented on this site. NAPS portfolios have performed well over the last few years, but this year something interesting has happened, as illustrated in the graph below. This graph shows the 2018 NAPS and SNAPS…

It's important to realise that Livermore was an unashamedly outright trader/speculator. His rules tend to move the market away from efficiency, which means that they are inherently unstable. (Compare with the QVM/GARP type of  "buy good quality stocks but don't overpay" rules which increase efficiency and reduce volatility.)When you trade using rules of the Livermore kind you set yourself in competition with the rest of…

Avoid outliers: My rules specify a maximum P/E ratio of 30 and a minimum of 5. Here's food for thought. If we look at the quantiles for P/E we get: 5%10%15%20%25%30%35%40%45%50%5.77.38.79.910.912.113.214.315.516.755%60%65%70%75%80%85%90%95%18.119.721.523.626.129.734.94477.4 So the choices of 5 and 30 are not balanced. You might consider a slightly higher lower bound of maybe 9 or 10. Although it seems like a small difference it could trim out…

Yes indeed. The rule:1y Volatility % < medianis almost the same as requiring a Risk Rating of Conservative, Balanced, or Adventurous (because according to the definition this adds up to the lower 45% of the volatility range).However according to the glossary, the Risk Rating is based on 3y volatility and the "1y Volatility %" only looks at the last year. I also use "rank in…

I've been wondering why these particular metrics might provide some resiliency. What follows is just me speculating wildly, but what are forums for if not to share unjustified opinions with the rest of the world eh?!% volatility - low volatility is a well-known "anomaly" when discussing efficient markets. It is a sign that there is less price uncertainty which may be an indicator of general…

Over what period have you taken this data to produce these graphs? Excluding the end of 2018, my understanding is that the value rank has been uncorrelated to performance for the past 5-10 years but had correlation prior to that time. My data only goes back to January 2016. I think there is a similar shape if you scrape the performance data for Value Rank…