Monday, 24 January 2011

factor returns;

The Raven runs a small statistical arbitrage portfolio as one his strategies. This week there were some interesting results in terms of factor returns. (ie. a typical "value factor" would be to rank stocks by their cheapness measured by price to book, and to see what a portfolio long the cheapest and short the most expensive would have returned).

Obviously the market factor was a negative;
The average of the universe was down (2.11)%.
Size returned +1.14%
Value +0.86%
Momentum (1.60)%

That is a classical flight to quality and a momentum reversal, with the stocks being punished the hardest, those that don't pay a dividend and have been rallying for months and have reached very high valuations, something like $RAX was off ~10%, whereas something like $GE was up ~7%.

It is also very interesting to note how much popular speculation has occured in US equity markets over the last few months, additionally, how bearish the world has been on European stocks, where we have seen Spain have a monster rally. We haven't reached the end of January and the two most popular trades of the year have been taking out and shot. (If some nutter rocks up with a shotgun and pops off a CEO we've never heard of, my rhetoric wasn't to blame!)

No comments:

Post a Comment