Out of Sample Results and Price Shocks

Backtested results may not reveal the effects of unanticipated shocks to the system.Most managed futures trendfollowing systems have seen historical declines that exceed their CAGR, with many approaching 50% or more. Flipping through the new book on the Turtles, I came across a great chapter on price shocks. In the passage Curtis Faith describes how his $20M trading account...

Don’t Know Your Soros From Your Cohen?

Hedge fund elite rankings.

Reader Questions

World Beta listens to reader questions and pens the responses over the Easter holiday.It is gratifying to see that my paper on tactical asset allocation just broke into the Top 300 downloaded papers on SSRN (out of over 116,000 papers). I receive a few questions fairly consistently, and I thought I would address the most common below.Have you tested...

Phoenix Rising

If you could come up with a short list of former Internet high fliers, CMGI would certainly be near the top of the list. Trading as high as the 160s in the late 1990s, the stock currently goes for ~$2.3 after going as low as $0.3 .What is interesting about this stock is that it started popping up on...

SHAZAM! (Also Books I Am Reading)

"A savvy collector who purchased a first edition of a Fantastic Four comic book for 10 cents and kept it in pristine condition over the past 45 years could sell it today for $36,000. That comes to a compounded average annual return of 32 percent" - Kevin Hassett, American Enterprise Institute, posted on American.comAmerican.com takes a look at historical...

Industry Mean Reversion

Is it time to buy an asset class or industry when everyone else is puking it up?Following up on our posts on mean reversion in equity markets and asset classes (here and here), I examine the properties of industry level mean reversion. The data used is yearly industry data from Standard and Poor's (thanks to Sam Stovall), and includes...

KKR Buying First Data for $29B

KKR is buying First Data Corp for $34 per share, or a 26% premium to the closing price on Friday. Monday's deal was unanimously approved by First Data's board of directors but the company will entertain other bids for the next 50 days. The company said it "intends to actively solicit proposals during this period."The Hedge Fund Consensus...

Spending It, Getting Creative, and Payout Yields

Just when everyone is smiling in private equityland, is the party almost over?Kolberg Kravis Roberts Private Equity Investors $5B fund has invested/committed 90% of its available capital, only 10 months after floating on Euronext. The shares priced at $25 but traded down to the low 20's and have since recovered to ~$24. (They listed the actual investment fund vs....

Model Validation and Further Research

The allure of a higher frequency system is compelling, but will higher transaction costs eat into results?It is always nice to see another analyst validate your research. Formula Research took a crack at the timing model , and after adding a few tweaks(substituting corporate bonds for Treasuries for one) found the results to be consistent(returns and risk were higher...

Tilson’s SuperInvestors and More Gender Bending

That's not your mother, it's a man, baby! - Austin PowersAfter the Journal of Wealth Management decided to change my name to Melanie, another group deemed it necessary to turn me into a woman. I am speaking at the Asset Allocation Summit in London this Summer, and IRC decided to Ms. me on their speaker list. (Sheesh, it's like...