I am currently Benjamin Graham’s “The intelligent Investor” and this strategy reminds me a lot of the rebalancing one he suggests adopting between stocks and bonds depending on their respective returns. I had thought to study the returns brought by a permanent rebalancing between individual stocks in a diversified portfolio but the sector approach is obviously much safer. I will be definitely buying your book soon.

Looking at the graphic, I notice that during the two periods during which the S&P globally changes direction the strategy seems to bring even bigger returns than usual. Could that indicate that tracking momentum allows to anticipate the change of direction and benefit from it ? Of course 20 years is not a big period of time and this could prove to be a statistical anomaly but I guess this might make an interesting research subject.

I work for http://www.wikinvest.com and am personally approaching high quality bloggers such as yourself to join the Wikinvest Wire(www.wikinvest.com/blogger/Wikinvest_wire). The Wire is an invitation only blogwire, which links bloggers across the financial space, and media partners such as CNET News, ABC News, SF Chronicle, USA Today, etc. The eventual reach of the Wire is slated to be around 400 million. Its a very exciting venture and I do hope you’re interested. Beyond the random walk is a great blog and we’re hoping to have you on the Wire.

If you are, let me know at advait@wikinvest.com and we should talk more.
Look forward to hearing from you

Thanks,
Advait

I compute the returns about once a month because the calculations are quite time consuming. I hope to report the returns in the very near future.

My book, Beyond the Random Walk, is designed for the ordinary investor, but not for someone who has never traded before. Experts can also learn from reading the book. The book has several strategies where you can do better than the market because the price movements are predictable. For example, a positive earnings announcement is usually followed by positive returns over the next several days. More details are in the book.

My blog targets the same kind of person and shows the actual implementation of one strategy in my book.

Vijay

If it interests you to appearl to a general audience, would you be open to answering a few questions, answers to which might interest the readers of Handshake 2.0?

If so:

Is Beyond the Random Walk for experts or can the general population benefit from some of your findings? If so, what would be the layman’s “takeaways” from your book?

What is a layman’s description of what you are trying to do in your blog?

Thanks!

There is a book – “Beyond the Random Walk” that has most of the anomalies that I have focused on. Other than the chapter on stale prices of mutual funds, all of the anomalies still work quite well. There are extensions in some cases, as research on these inefficiencies is ongoing.
In addition to the book, please look at articles in the Financial Analysts Journal and the Journal of Portfolio Management. Unfortunately, most of the research is not directly applicable to exploiting inefficiencies but the research forms the basis for tradable strategies.
All the best and let me know if you have any other questions.

Vijay

Can you please list some of your research papers, books, or other literature that deals w/ exploitable market inefficiencies that still exist today. Also, could you tell us the easiest way to obtain that literature?

Thank you,
Aaron Arpi

I have not studied how international funds would affect performance and diversification. That is something worth doing in the next few weeks/months. Good suggestion.

Vijay

I did much more research on momentum in industries with futures markets but the results reported in the book could not stand to further scrutiny, and subperiod analysis. So I have not excluded any industries for the last 3-4 years.

You have excellent questions and I appreciate the thoroughness with which you have read this chapter.

Vijay