We have spoken about reversion, or losers outperforming winners. This approach works. In their 1985 paper ‘Does the stock market overeact?”, DeBondt and Thaler explained the idea of mean reversion and how it leads to the Loser’s portfolio of 3 years outperforming the Winner’s portfolio of the same time. Findings of reversion in stock prices towards some fundamental values remain in literature for a decade. DeBondt and Thaler[1985] using overreaction showcased that a stock experiencing a poor performance over a 3-5 year of period subsequently tend to outperform that had previously performed relatively well. This implies that, on average, stocks which are ‘losers’ in terms of returns subsequently become ‘winners’ and vice versa. This is the reversion strategy.

In another paper written by Narasimhan Jagadeesh and Sheridan Titman in 1993 the authors illustrate returns to buying winners and selling losers. The conclusion of the paper states “Trading Strategies that buy past winners and sell past losers realize significant abnormal returns”. The paper studies the momentum strategy comprehensively but focuses on the behavioral aspect i.e. what investor behavior causes the superior returns to happen in the year following the portfolio formation data and then the returns dissipate within the following 2 years?

Both these papers are highly cited and are considered significant in Behavioral Finance. Thaler and Kahneman got the Nobel Prize in 2002 for their work. However despite such path breaking work application of the work is limited. Were the Behavioral Finance practitioners more concerned about the behavioral aspects in the investment business than about investment strategies? Is this the reason why we never had a study talking about this conflict? The conflict is that in markets it is profitable buying winners and selling losers and vice versa.

To read the complete article visit Business Standard.

Our Jiseki Time cycles are seasonal patterns of strength or weakness in assets. They are derived from percentile rankings from 1 to 100. The higher the percentile more the chance for an asset to weaken and worst the ranking, better the chance for the respective asset to outperform. 100 is top relative performance and 1 is worst performance. The idea is that performance is cyclical. A top performer will underperform in future and vice versa. A top relative performer is also the worst value pick and the top relative underperformer is the best value pick. Jiseki is another name for Performance cycles, time triads and time fractals. The signals are illustrated as a running portfolio and as Jiseki Indices. These signals can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades.

Jiseki Interpretation. Signals are interpreted as crossovers between various Jiseki Cycles. All three Jiseki cycles (Jiseki 1,2 and 3) depict different time frames. Example: An asset is ranked above 80 percentile and all the three Jiseki cycles are pointing lower, this suggests a running SHORT SIGNAL. Our Jiseki Indices use different kind of exits based on price and Jiseki Cycles. We have color coded the (Jiseki 1>Jiseki 2) SHORT zones with brown sandy (burlywood) and grey (Jiseki 1>Jiseki2) for LONG SIGNALS.

Coverage: CNX 100 components and all Indian Sector Indices.

Mukul Pal, is a Chartered Market Technician, MBA Finance and a member of the reputed Market Technicians Association (MTA). He has more than a decade of Capital Market experience dealing with derivatives and global assets. He has worked for Bombay Stock  Exchange, multinational Banks and brokerage houses in leading research positions before starting on his own in 2005. He is the President of the MTA Central and Eastern European Chapter.

Juicing the orange was a wonderful book I read in a long time. An economist dabbling with an ad book and writing about one might seem strange, but then are markets not about understanding trends, society, innovation and creativity. The book written by Pat Fallon founder of Fallon worldwide suggests creative leverage as the solution.

Fallon’s used creativity to offer real solutions for many brands. The case of ArcaAEX was unique. In 2002, the Securities and Exchange Commission (SEC) approved ArcaEX, as it was then known, as a full-fledged stock exchange so that it could directly compete with the New York Stock exchange (NYSE) and the Nasdaq. ArcaEX was virtual. It had a visibility disadvantage. By the end of the promotion 65% of professional traders used AracaEX. By 2005, the electronic stock exchange technology was accepted by traders. That fall, the 213 year old NYSE announced that it would merge with ArcaEX. Creativity overlaps. Just like ArcaEX used it to change the industry, Fallon used creativity to promote the exchange.

Somewhere creativity was about starting from scratch. It was about relentless reductionism, reducing the problem to a single insight. It got me thinking about creativity. What does creative leverage mean in capital markets? What hampered it all this while? Why don’t we have numerous ideas to make money? Why financial innovations suck? Are the economists really being creative? Or is economics so far from advertising, which is fun? Was creativity not about solutions and fun? In 1997, California Management Review published a study that investigated how experts in fields ranging from physics to art to business felt about such abstract concepts as wisdom, intelligence and creativity. It was only the businesspeople that tended to believe that it was unwise to be creative….

To read the complete article visit Business Standard.

Our Jiseki Time cycles are seasonal patterns of strength or weakness in assets. They are derived from percentile rankings from 1 to 100. The higher the percentile more the chance for an asset to weaken and worst the ranking, better the chance for the respective asset to outperform. 100 is top relative performance and 1 is worst performance. The idea is that performance is cyclical. A top performer will underperform in future and vice versa. A top relative performer is also the worst value pick and the top relative underperformer is the best value pick. Jiseki is another name for Performance cycles, time triads and time fractals. The signals are illustrated as a running portfolio and as Jiseki Indices. These signals can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades.

Jiseki Interpretation. Signals are interpreted as crossovers between various Jiseki Cycles. All three Jiseki cycles (Jiseki 1,2 and 3) depict different time frames. Example: An asset is ranked above 80 percentile and all the three Jiseki cycles are pointing lower, this suggests a running SHORT SIGNAL. Our Jiseki Indices use different kind of exits based on price and Jiseki Cycles. We have color coded the (Jiseki 1>Jiseki 2) SHORT zones with brown sandy (burlywood) and grey (Jiseki 1>Jiseki2) for LONG SIGNALS.

Societal quest for value is continuous, repetitive, similar, connected with cooperation and patterned.

I don’t know who is better, Clint Eastwood or Rajkumar Hirani. I saw two back to back films, one was ‘3 idiots’ on Thursday and Friday it was ‘J Edgar’. Though this non confirms my (self proclaimed) film buff status, I took a while to catch up on the top grossing cinema creations. Blockbuster or award winning films force you to think, relate and see patterns irrespective of the settings, regional or global.

The search or quest for value has started to emerge out of the societal expression, be it films, books or protests. Whether it was Chetan Bhagat’s famed work, a Bollywood adaptation or Eastwood and DiCaprio’s attempt to educate Americans and the world about the workings of FBI and science of investigative innovations, there is a visible creative attempt to cherish the value of history and acknowledge purposeful life over corporate rat race.

The continuity of value…Value expressions have continuity because revolutions happen, creative expressions are awarded and history prospers, as we keep revisiting it. A failed present and murky future outlook keeps sending the society back to the past, to seek lessons from the valuable old. This ‘value revisiting’ also creates science as we keep refining our value measuring systems. Edgar insisted on a centralized finger prints depository to enhance investigation. What seemed ridiculous then turned out to be a necessary innovation.

The continuity of value can also be witnessed in the similarity of times…

To read the complete article visit Business Standard.

1637 Tulip mania damages the futures market and Dutch trade, in general.
1720 French and British stocks of firms cashing in on New World resources hit bottom.
1772 The financial crisis that occurred in the UK in 1771 leads to credit crisis, which spreads to North America.
1792 The Panic of 1792 was a financial credit crisis that occurred due to the speculation of William Duer and Alexander Macomb against stocks held by the Bank of New York.
1797 Reserves in the UK fall low, creating a monetary crisis. Bank of England put a hold on cash payments, creating widespread public panic.
1810 English credit crunch.
1813 Danish state bankruptcy.
1819 The Panic of 1819 was the first major financial crisis in the US.
1825 London stock market panic from over-speculation in Latin American investments.
1836 US real estate speculation causes stock markets to crash in the UK, Europe, and then the US.
1847 Credit crisis and bank panic ensue when railroad stock prices crash in France and the UK.
1857 During the Civil War in the US, credit crisis crashed equity prices. All nations that trade with the US were affected.
1866 ‘Black Friday’ happens from railroad speculation. A bank panic starts, which leads to lack of credit.
1873 Vienna Stock Exchange collapses, causing the ‘great stagnation’ on a global scale, which lasts until 1896.
1882 In France, Union Generale goes bankrupt, causing banking crisis and market crash.
1890 The UK’s oldest bank, Barings, nearly collapses from its exposure to Argentine debt.
1893 The Panic of 1893 in the US was marked by the collapse of railroad overbuilding and shaky railroad financing, which set off a series of bank failures.
1893 Australian banking crisis.
1896 The Panic of 1896 was an acute economic depression in the US, precipitated by a drop in silver reserves and market concerns on the effects it would have on the Gold Standard.
1907 The US bank panic spreads to France and Italy after the stock market collapse.
1910 Shanghai rubber stock market crisis.
1910-11 The Panic of 1910-11 was a slight economic depression that followed the enforcement of the Sherman Anti-Trust Act.
1921 Commodity prices crash.
1923 Hyperinflation in Germany starts monetary crisis.
1929 ‘The Great Depression’ begins after equity crash.
1931 The UK, Japan, Germany, and Austria experience financial crises.
1933 Gold Standard given up by the US, starting panic in the banking system.
1966 US credit crisis creates deflation and huge economic slump.
1973 OPEC quadruples the price of oil, which leads to global financial crisis.
1982 Global credit crunch prevents many developing countries from paying their debt.
1987 Bond and equity markets crash.
1987 ‘Black Monday’ – the largest one-day percentage decline in stock market history.
1989 Japanese bubble.
1989 Junk bond crisis.
1989-91 Savings and loan crises in the US.
1992 French Maastricht Treaty sparks crisis in European Monetary System.
1994 Major bond market correction.
995 Mexican financial crisis caused by the peso’s peg to the dollar during excessive inflation.
997 Asian financial crisis creates exchange rate and banking crises, created from stock market
and real estate speculation along with many Asian currencies pegged to the US dollar.
1998 Russia defaults on payment obligations during major financial crisis.
2000 Dot-com bubble pops, creating a massive fall in equity markets from over-speculation in
tech stocks.
2001 Another junk bond crisis.
2001 September 11 attacks hinder various critical communication hubs necessary for payment in
the financial markets.
2001 Economic crisis in Argentina, resulting in the government defaulting on payment obligations.
2002 Bond market crisis in Brazil.
2007 US real estate crisis causes the collapse of massive international banks and financial
institutions. Equity markets take a dive.
2008 Credit crunch and a frozen interbank market create financial crisis.

Source: Financial Technologies Knowledge Management Company

Do you know how many times you use “Probably” in a day? The word is a part of our colloquial expression because society embraces uncertainty, disorder and randomness as natural. Whether it’s a rolling die, a tossing coin, or an event, uncertainty is everywhere. This is why the society believes that a butterfly’s wings in Brazil can set off a tornado in Texas.

But mathematicians have illustrated a very contrary certainty again and again, the certain pattern of randomness. Imagine a robotic beetle placed in a twisting tube. The creature executes an infinite random walk by walking forever as it moves randomly one step forward or one step back in the tube. Assume that the tube is infinitely long. What is the probability (chance) that the random walk will eventually take the beetle back to its starting point?

In 1921, Hungarian Mathematician George Pólya proved that the answer is one – infinite likelihood of return for a one dimensional random walk. If the beetle were placed at the origin of a two – space universe (a plane), and then the beetle executed an infinite random walk by taking a step north, south, east, or west, the probability that the random walk would eventually take the beetle back to the origin is also one.

Let me take you through some more random patterns which has intrigued mathematicians for ages. Parrondo’s Paradox. In the late 1990’s, Spanish physicist Juan Parrondo showed how two games guaranteed to make a player lose all his money can be played in alternating sequence to make the player rich….

To read the complete article visit Business Standard.

The Dreyfus affair was a political scandal that divided France in the 1890s and the early 1900s. It involved the conviction for treason in November 1894 of Captain Alfred Dreyfus. He was sentenced to life imprisonment for allegedly having communicated French military secrets to the German Embassy in Paris.

What happened? In 1906 Dreyfus was exonerated and reinstated as a major in the French Army. He served during the whole of World War I, ending his service with the rank of Lieutenant-Colonel.

How did Dreyfus’s fortune change? Henri Poincare, a respected mathematician cited probability and statistics. He said that undue weightage to new evidence was incorrect and judgment should be made on basis of all other available proofs. He called on the jury to rely on scientific education rather than feelings.

It was much before probability that David Hume criticized against cause and effect. He said that certain objects are constantly associated with each other. But the fact that umbrellas and rain appear together does not mean that umbrellas cause rain. The fact that the sun has risen thousands of times does not guarantee that it will do so the next day. In criticizing concepts about cause and effect Hume was undermining Christianity’s core beliefs.

With Hume’s doubts about cause and effect swirling about, Thomas Bayes began to consider ways to treat the issue mathematically. In any event, problems involving cause and effect and uncertainty filled the air, and Bayes set out to deal with them quantitatively….

To read the complete article visit Business Standard.

GUESS ME JISEKI (03) is Turmeric India.

The one above is SUGAR DELHI

Bet the first to get 3 of the 5 ‘Guess Me Jiseki’ correct a week and get a week of Orpheus Research for free.

Our Jiseki Time cycles are seasonal patterns of strength or weakness in assets. They are derived from percentile rankings of 0 to 100. The higher the percentile more the chance for an asset to weaken and worst the ranking, better the chance for the respective asset to outperform.

Alpha is a daily strategy signal product that gives trading and investment signals. Alpha is a numeric Ranking product based on TIME fractals. The signals are illustrated through tracker and running portfolios. Alpha can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades. Alpha is a part of the time triads analytics developed by Orpheus Research.

Philosophy of war is connected to psychology, timing and calculation of chance. Which can help both in life and markets. This work looks at SUN TZU’s timeless work from the perspective of life and markets.

Little has changed over two and a half millennia. People’s psychology can still be manipulated in the same ways. Mastering the market is still easy compared to mastering the mind. Assuming market or life is adept in the art of war, a lot of TZU’s work can be revisited. He said, “If you know the enemy (market) and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy (market), for every victory gained you will also suffer a defeat. If you know neither the enemy (market) nor yourself, you will succumb in every battle.”

The stronger opponent (market or life) feigns disorder, and crushes the weak. When weapons are dulled, ardor damped, strength exhausted and treasure spent, the stronger opponent (market or life) will spring up to take advantage of your extremity. None, however wise, will be able to avert the consequences that must ensue. TZU also talks about haste. How it is unacceptable. He calls it the stupid haste in war (markets or life). There is instance of a country having benefited from prolonged warfare. A constant war with markets (life) is like intra-day system less trading (complaining in life). Behavioral finance has proved day trading to be net inefficient and wasteful. Just like in war, the greater object is victory, not lengthy prolonged (trading or complaining) campaigns.

Another reasonable assumption is to replace fighting with trading…

This special report carries review of the short trade ideas with levels, and projections on NSEBANK, Lupin, HDFC, Petronet, Axis Bank, Reliance, LIC and NTPC .

To read the complete report download it from Orpheus E store.

The article without cases was written for Business Standard

Alpha is a daily strategy signal product that gives trading and investment signals. Alpha is a numeric Ranking product based on TIME fractals. The signals are illustrated through tracker and running portfolios. Alpha can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades. Alpha is a part of the time triads analytics developed by Orpheus Research.

Coverage India: CNX500 traded stocks and Indian Indices.

Plato, one of the first philosophers to discuss ideas in detail.

Scientific Paper Ideas

Tossing the TIME coin
The butterfly effect myth
The econophysics myth
Correlation of worst losers portfolio to universe (winners portfolio)

Social Trends

The New Google
Generation X – Strauss and Howe

General Ideas

(D) Decision making and TIME  - 17 JULY
Environment and TIME
Open source and TIME
Short History, Long Time

Statistical Paper Ideas

Parrondo’s paradox
Long PE – Short Price and vice versa
Hedge Inefficiency
Pair ineffciency
Statistics and TIME
Beta Cycles
The time exponent
Why is nature exponential?
What is Time Indexing?
What is Randomness?
Growth vs. Value
Sunspot and TIME
What is a PAIR?
Correlations vs Cycles
Cycles vs Inefficiency
The power law in the Fibonacci sequence
Time vs APM

Technical Analysis Paper Ideas

Summation/Hurst/Hierarchy
Explaining the 13 Elliott Patters with Time Triads
How can TIME TRIADS explain inflation? History of inflation
How can TIME TRIADS explain interest rates? History of interest rates
Introducing time oscillators
The New Vix (Jiseki Character)
What is a market leader?
Why does an oscillator fail?

Mathematical Paper Ideas

Patterns in Irrational numbers
The magic of Euler’s number
Simplifying Fractals – MSET and TIME
Recreating Cantor Set through Time Translation
The intertemporal choice (The story of John Rae)
Avogadro number
Champernowne Sequence