Archive for the ‘Performance Cyclicality’ category

GUESS ME JISEKI (05)

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.


Revisiting Microfinance

We are working with a group of experts to improve our performance cycles for the microfinance space. The aim is to understand credit risk. Microfinance lenders were criticised for profiteering from unfairly high rates of interest. This made it imperative to review practices, understand the universe of microfinance variables and see if an objective system could be arrived at to assist the sector players.

Though microfinance has a moralistic role of creating social impact, it’s hard to draw the line between profit and a social cause. What happened in Andhra Pradesh with SKS has created a flutter among players. The ‘for profit’ players attempt to walk the tight ‘social cause’ rope. Also, we have an economic cycle that connects consumption patterns, basic demand and economic growth to microfinance. And, a downward economic cycle hurts all finance players, whether micro- or conventional finance.

This is why we took up the challenge to build an industry-wide model for the sector. Microfinance is a bit different compared to conventional finance. On one side are social impact variables like poverty alleviation indicators and, on the other, are financial variables and microfinance institutions that are a part of the listed exchange market. The approach that identifies outliers in a group of stocks could also do the same for social variables. The idea of seasonality is not only about a sector’s good or bad behaviour over a period of time, but also about its quarterly performance in an overall bad year. Our performance cycle approach could also look at social variables like poverty, infant mortality and trends in the health services….

This article was written for Business Standard


The Big Decision

The latest HBR carries an article written by Daniel Kahneman on decision making. The article gives a checklist approach to handling decision making at an institutional level to avoid biases. According to the article, the potential for distortions are so high that knowing biases was not enough to eliminate them. The authors illustrate the reflective and intuitive thinking process. In intuitive thinking we don’t focus on doing things, we just do them. Intuitive is good at making contextual stories. This is when cognitive failures happen because there is no way of knowing when they are happening.

According to the authors talking doesn’t eliminate biases. A more methodical approach is needed. A study observed that eliminating biases achieved returns 7% point higher.

Kahneman and team suggest that eliminating biases can improve decision making profitably. So if the method works for businesses, the approach should also work for investors and markets and…

This article was written for Business Standard

To read this article and for regular updates on behavioral finance subscribe to Orpheus Research Time Triads Update.

Time Triads, Time Fractals, Time Arbitrage, Performance Cycles are terms coined by Orpheus Research. Time Triads is our weekly market letter. The report covers various aspects on TIME patterns, TIME forecast, alternative research, emerging markets, behavioral finance, market fractals, econohistory, econostatistics, time cyclicality, investment psychology, socioeconomics, pop cultural trends, macro economics, interest rates, derivatives, money management, Intermarket trends etc.

 


Limits to arbitrage?

 

Behavioral finance used mean reversion cycles to challenge the classical economics (21 Apr article), but preferred to explain mean reversion through sentiment and not ‘Time’. We can’t expect Markowitz and Fama to open up this fissure and crack the dam open and fight back, because not only this means that they have to accept that classical economics failed to answer more than a few questions, accept that the finance we are still taught at ivy league could be far from complete, undo 100 years of research and only then can there be a new academic war.

The new fissure (weak argument) behavioral finance has is that though there is a limit to what can be arbitraged and inefficiencies can last longer, price reversal happen every 2-3 years. So what the practitioners say is that on a large time frame arbitrage is possible (buying the worst 3 year losers and selling the best 3 year performers) but not on small time frames. Even this time they explain how it’s the sentiment and investor profile that is to be blamed. Because investors are loss averse they over-react pushing losers lower. Investors also suffer from under-reaction. This is the reason momentum continues and tops extend. The over-reaction and under-reaction takes years to unwind.

Above this…

This article was written for Business Standard

To read this article and for regular updates on behavioral finance subscribe to Orpheus Research Time Triads Update.

Time Triads, Time Fractals, Time Arbitrage, Performance Cycles are terms coined by Orpheus Research. Time Triads is our weekly market letter. The report covers various aspects on TIME patterns, TIME forecast, alternative research, emerging markets, behavioral finance, market fractals, econohistory, econostatistics, time cyclicality, investment psychology, socioeconomics, pop cultural trends, macro economics, interest rates, derivatives, money management, Intermarket trends etc.

 


The Toronto Cycles

Abstract: This paper applies performance cycles to the top 100 stocks of Toronto Stock Exchange. The idea of time cyclicality and performance cycles has been explained as a method of market cyclicality in the following academic papers and published literature.

1: The Divergence Cycles0
2: The BRIC Model from a Japanese Perspective - Pre and Post Financial Crisis Review and Forecasts1
3: Time Fractals2
4: Temporal Changes in Shiller’s Exuberance Data3
5: Time Duration Decay in Romanian Capital Markets4
6: MTA Knowledge base – Performance Cycles5
7: Mean Reversion Cycles6

In performance cycles, assets are ranked based on price performance or any other fundamental or statistical parameter.  Performance like everything else is driven by time cyclicality. The asset rankings take the form of an oscillator, which moves from 0.1% to 100% for a group of 1000 assets. The performance cycles can be drawn form any time frame starting 1 min to multi years. In this report performance cycles for stocks on TSE are illustrated for minor, intermediate and primary time frames. Performance cycles nest like a hierarchy of various degrees.

Fig1. Performance is hierarchal

Ranking the assets.

We ranked the following assets. YELLOW MEDIA, ENERPLUS CORP, LOBLAW COS LTD, MANULIFE FINL, PENGROWTH ENER, CI FINANCIAL, URANIUM ONE, PENN WEST PETR, BROOKFIELD PRO, BONAVISTA ENER, SUN LIFE FINL, BELL ALIANT, PETROBAKKEN EN, WESTON LTD, ARC RESOURCES, INTACT FNCL CO, CDN TIRE CORP, GREAT-WST LIFE, TELUS CORP, VALEANT PHAR, TRANSALTA CORP, THOMSON REUTER, CAMECO CORP, MAGNA INTL, POWER FIN CORP, ALIMENT TD B, IGM FINANCIAL, CENOVUS ENERGY, RIOCAN REAL UN, CDN UTILITIES, TRANSCAN CORP, CDN OIL SANDS, BCE INC, NEW GOLD, CURRSHS CAN DL, TIM HORTONS,   ENCANA CORP, GILDAN ACTIVEW, FINNING INTL, BK NOVA SCOTIA, YAMANA GOLD IN, FORTIS INC, CDN PAC RAILWY, METRO A, LUNDIN MINING, EMERA INC, INTER PIPELN U, PEMBINA PIPELI, ONEX CORP, VERMILION ENER, PAN AM SILVER, ROGERS COMM B, SAPUTO INC, WESTERN COAL, VITERRA INC, SHAW COMM, TECK RESOURCES, CENTERRA GOLD, GOLDCORP, CGI GRP CL, BARRICK GOLD, NIKO RES LTD, IAMGOLD CORP, TORONTO DOM BK, FRANCO NVDA CO, KINROSS GOLD, BAYTEX ENERGY, SNC LAVALIN, BOMBARDIER B, IVANHOE MINES, CDN IMPER BANK, FAIRFAX FNCL H, FST QUANTUM MI, SHOPPERS DRUG, POWER CORP CAN, BK OF MONTREAL, INMET MINING, AGRIUM IN, NEXEN INC, ELDORADO GOLD, ENBRIDGE INC, NATL BK OF CAN, ROYAL BK CAN, AGNICO EAGLE, SILVER WHEATON, IMPERIAL OIL, HUSKY ENERGY, POTASH CORP, SUNCOR ENERGY, BROOKFIELD AM, TALISMAN ENERG, CDN NTL RAILWY, RESEARCH MOTIO, EQUINOX MNRLS, SINO-FOREST, PETROMINERALES, CDN NATURL RES, CONSLDTD IRN M, OSISKO MINING, CRESCENT PNT, PACIFIC RUBIAL

Fig2. Toronto 100 with FXF (Canadian Dollar ETF) ranked based on performance for 3 months

Source: Authors work. Data provided by Thomson Reuters

Ranking the assets - II

The high ranked assets are outperformers over the last 3 months and the low ranked assets are respective underperformers. These rankings move cyclically and create performance cycles for individual assets on different degrees of time. Below we have illustrated the rankings of 3 month and 6 months together. A stock could be the best performer over 3 month but not best over a 6 month period.

Fig3. The ranking in percentile over 3 and 6 months.

Performance Cycles - If we look individually at the stock rankings for 1 month, 3 month and 6 month, the create performance cycles. The left hand side is the percentile. The right hand side is the price. The performance cycles of 1 month (red), 3 months (blue), 6 months (grey dashed). The cases illustrated here take three stocks PWT, UUU and AEM. These are extreme performers and according to performance cycles extreme performers in a group of assets should see a reversal in performance. The top performer should underperform and vice versa. We have marked red arrows when the 1 month (red) cycle pushes below the 3 month (blue) cycle from high rankings and when the large 6 month (grey) cycle is also pointing lower. In case the 1 month red pushes back above 3 month, the trade is closed and reinitiated again if the initial condition persists.

Performance Cycle Cases on PENN WEST PETR, URANIUM ONE and AGNICO EAGLE

Performance Cycles for IVANHOE MINES (IVN.TO), CDN OIL SANDS (COS.TO), YELLOW MEDIA (YLO.TO), MANULIFE FINL (MFC.TO), CI FINANCIAL (CIX.TO), POTASH CORP (POT.TO)

Conclusion.

Performance cycles are a method of illustrating asset seasonality on a multiple degrees of time. When as asset reaches an extreme above 90% performance or sub 20% performance, the asset performance reaches an extreme and which makes it prone to reversal in previous trend. The performance cycles can assist in sector selection, stock selection, risk management, model portfolio construction and of course trading. Below we have tabulated the rankings in percentile of 3 month and 6 month for the assets under study.

Bibliography - Index

1: The Divergence Cycles0

2: The BRIC Model from a Japanese Perspective - Pre and Post Financial Crisis Review and Forecasts1

3: Time Fractals2

4: Temporal Changes in Shiller’s Exuberance Data3

5: Time Duration Decay in Romanian Capital Markets4

6: MTA Knowledge base – Performance Cycles5

7: Mean Reversion Cycles6

For regular updates on performance Cycles on Toronto Stock Exchange assets write to us today for a free trial for Orpheus Time Analytics.

Time Triads, Time Fractals, Time Arbitrage, Performance Cycles are terms coined by Orpheus Research. Time Triads is our weekly market letter. The report covers various aspects on TIME patterns, TIME forecast, alternative research, emerging markets, behavioral finance, market fractals, econohistory, econostatistics, time cyclicality, investment psychology, socioeconomics, pop cultural trends, macro economics, interest rates, derivatives, money management, Intermarket trends etc.

 


The Objective System

Money management systems have existed since the time markets were created. It was a natural step to harness and comprehend the market. The market universe always had numerous elements and the system selected a few of these. It was always like the study of a small sample.

As early as 1800, it was the candlestick charting system at the Osaka rice exchange. The 1850s saw bookkeeping come in vogue and fundamental systems were created on the basis of analysing new information (news), valuing the asset and observing the divergence of value from price. Technical analysis indicator systems of 1884 assumed that the price discounted all information. The use of modern computers brought probability theory and Gaussian curves to the mainstream.

Systems will always give a telescopic view to look at the universe, a piece at a time. We can only estimate the big picture, never actually see it. In such a limitation, systems should be viewed as risk-reducing ideas rather than return-increasing approaches. David Aronson’s book on evidence-based technical analysis quotes an example of excessive searching. While searching for the best predictive correlation to the S&P500, the UN database suggested the level of butter production in Bangladesh had a correlation of 0.7 with the S&P500. The more you search, the more correlation you can find — of everything with anything.

Systems can also be viewed as an approach to identify opportunities that stand out and have real merit. Aronson talks about real merit opportunities as a skilled musician, a real talent, which would stand out of his group. Real skill is like a real asset that stands out in performance from the rest of peers. Because the market universe is large, market participants adopt various systems.

Some system ideas get popular and some remain peripheral. Seasonality as a system is adopted by the minority. It’s only for the value pickers and for contrarians, who have longer holding periods. Seasonality as a multi-week, multi-month trading is a novel approach. Performance cycles and numeric ranking are our objective system, which is built around seasonality for a group of assets. Performance cycles also seek outliers, but bet against them. The top outliers, the best performers, are a ‘reduce’ for us, as they are the most expensive. And, the worst outliers are the value accumulate and buys for us, as they are inexpensive. This idea of seasonality in performance works irrespective of whether one is investing for a few minutes or a few years.

HDFC Bank, Bank of Baroda, Tata Motors and TCS are the top outliers for a multi-month period and, hence, the best reduce for us. The oversold worst rankers — Punj Lloyd, Housing Development, Reliance Infra, Reliance Power, Sesa Goa, NTPC — are the best value picks for us. Nifty, at 26 percentile, is also near-worst performance. With Daily momentum readings oversold still, minor multi-day positivity on the index cannot be ruled out. On the higher side, we are not looking Nifty above 5,800 now. March is known for reversals and would need a review.

To keep updated with performance cycles and rankings subscribe to Orpheus Research Reports.

This article is written for Business Standard

Time Triads, Time Fractals, Time Arbitrage, Performance Cycles are terms coined by Orpheus Research. Time Triads is our weekly market letter. The report covers various aspects on TIME patterns, TIME forecast, alternative research, emerging markets, behavioral finance, market fractals, econohistory, econostatistics, time cyclicality, investment psychology, socioeconomics, pop cultural trends, macro economics, interest rates, derivatives, money management, Intermarket trends etc.

Sensex vs. Dow

Emerging equity is an active asset class. Money flows in and out of them actively. No wonder intermarket analysis between Sensex and Dow assumes an important role.

This week we are looking at Sensex, Dow and their intermarket relationship. Sensex is testing its previous low. The more prices test their previous supports successively, the more likely to break. Even if look at the current formation as an Elliott C wave and not a 3 wave down (Fig. 3), next immediate supports lie at 18,000. Weekly momentum and negative Rieki performance cycle (Fig. 1) confirm our negative case.

What happens from Sensex 18,000 is the tricky part. Whether that’s all the correction we will have on India? Or is there more to come? …

This article is written for ATMA

Time Triads, Time Fractals, Time Arbitrage, Performance Cycles are terms coined by Orpheus Research. Time Triads is our weekly market letter. The report covers various aspects on TIME patterns, TIME forecast, alternative research, emerging markets, behavioral finance, market fractals, econohistory, econostatistics, time cyclicality, investment psychology, socioeconomics, pop cultural trends, macro economics, interest rates, derivatives, money management, Intermarket trends etc.

The Global Rieki

The best part of looking at performance is that more the coverage the better the identification, isolation and interpretation of performance gets. We have increased our global coverage yet again. Now we are tracking all the S&P 500, top commodities, top currencies, top global indices and some emerging market assets.

Looking at such a cross section of assets technically could be tiring. But again even if we can’t chart such a large universe, we need systems to filter out potential outperformers from underperformers. We have mentioned on prior occasions the performance is cyclical. If we assume that this premise is true, life becomes easy for a technician. She (he) already knows his technical short list of assets.
Today we will be reviewing…

This article is written for ATMA

Time Triads, Time Fractals, Time Arbitrage, Performance Cycles are terms coined by Orpheus Research. Time Triads is our weekly market letter. The report covers various aspects on TIME patterns, TIME forecast, alternative research, emerging markets, behavioral finance, market fractals, econohistory, econostatistics, time cyclicality, investment psychology, socioeconomics, pop cultural trends, macro economics, interest rates, derivatives, money management, Intermarket trends etc.

Does Nifty Sleep?


If performance is cyclical like everything else in nature than asset prices are always relatively outperforming and underperforming. An underperforming asset is sleeping and stagnating. It lacks trading interest, tests patience and will deliver less than expectations. Now one may say, it is impossible to find when the Nifty sleeps and wakes up? Before we prove that one can pinpoint time let’s look at the shifting seasonality from sleeping and waking performance. Once we establish this seasonality, a momentum trader or investor would know that Nifty is going to sleep. Then you can do better with investments by simply ignoring Nifty.

Performance cycles is a term coined by Orpheus Capitals. This is another name for time triads, time arbitrage, time fractals but expressed in terms of relative performance. It’s a bounded oscillator that moves in a range say from 1 to 30. 1 is top relative performance and 30 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.

Time Triads, Time Fractals, Time Arbitrage, Performance Cycles are terms coined by Orpheus Research. Time Triads is our weekly market letter. The report covers various aspects on TIME patterns, TIME forecast, alternative research, emerging markets, behavioral finance, market fractals, econohistory, econostatistics, time cyclicality, investment psychology, socioeconomics, pop cultural trends, macro economics, interest rates, derivatives, money management, Intermarket trends etc.

This article is written for Association of Technical Market Analysts


How did the worst performer Spain reach so far?

Spain beat Germany to book first ever World Cup final slot.

source: wikipedia

This is what we said on 14 Jun

“We don’t want to make it all work and no play. So on a lighter note, here goes the sports bet. Brazil, Germany, Italy have been in the top 3 positions, 9, 10 and 7 times respectively since 1930s. This makes them the top rankers. Performance cycles suggest that top rankers disappoint and worst rankers surprise as performance reverses. The question of value for money does not come from picking a previous winner but one who has more odds against it.”

Time Triads, Time Fractals, Time Arbitrage, Econohistory, Performance Cycles are terms coined by Orpheus Research. Time Triads is our weekly market letter. The report covers various aspects on Time patterns, Time forecasts, alternative research, emerging markets, behavioral finance, market fractals, econohistory, econostatistics, time cyclicality, investment psychology, socioeconomics, pop cultural trends, macro economics, interest rates, derivatives, money management, Intermarket trends etc.

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Orpheus Research at Reuters - United Kingdom

Orpheus Research at Reuters - United States