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[amibroker] Re: Phsst , Exponential Growth Rates and Low Volatility High Growth Stocks



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<Is this the kind of thing that you are working on, Phsst>

Greg,

I am getting older every day, not to mention a little tired right now.

I exposed to your my AB Explore code.

So why do you have to ask if this is the kind of thing that I am
working on? Your question just doesn't make sense. Tell me two (2)
things... what is it that you did not understand about my explore, and
what hidden agenda to you have in this post?

Phsst

--- In amibroker@xxxxxxxxxxxxxxx, "Greg" <gregbean@xxxx> wrote:
> Hi,
> 
> This stock ranking is from the Mechanical Investing board on The
Motley Fool . I uses statistical analyses in the ranking of stocks.
Method is described below. Is this the kind of thing that you are
working on, Phsst
> 
> Greg
> 
> URL of last week's projections:
> http://boards.fool.com/Message.asp?mid=19280301
> 
> Here are the Exponential Growth rankings for Friday, July 11, 2003. 
> 
> Screen	StocksRisk Averse		RYL	QADI	CECO	DOX	IMDCPessimist	
QADI	RYL	DOX	AMHC	CECORisk Neutral		QADI	EXLT	DNA	AMHC
RYLOptimist		QADI	EXLT	DNA	AMHC	PHSLow Volatility High Growth		EDMC
(*)	EBAY (*)	PGR	OCR	IGT
> (*) These are the viable option candidates this week. A stock is a
"viable" candidate for a 6/3 option if (a) it is in the top 5 of the
LVHG screen, (b) it has a projected annual growth rate greater than
50% under the Risk Averse formula, and (c) it has publicly-traded call
options.
> 
> Please see the notes below for a brief explanation.
> 
> Projected Total Annual ReturnsBased on 6 Months of Prior Data,
Exponential Growth Model, and Friday close.			Risk		Risk		Low
VolatilityStock	Mean	Sigma	Averse	Pessimist	Neutral	Optimist	High
Growth*RYL	0.027253	0.043519	120%	201%	313%	465%	QADI	0.036013
0.084674	92%	253%	551%	1098%	CECO	0.025243	0.054176	70%	151%	272%
449%	DOX	0.026600	0.060454	67%	158%	299%	517%	IMDC	0.021822
0.044461	64%	126%	211%	329%	EDMC	0.018796	0.034003	63%	108%	166%
240%	1EBAY	0.016640	0.027999	59%	94%	138%	191%	2GILD	0.018108
0.035958	53%	98%	156%	232%	AMHC	0.028011	0.072105	52%	155%	329%
622%	KSWS	0.020037	0.044072	50%	106%	183%	290%	PGR	0.014978
0.028759	44%	77%	118%	168%	3AMZN	0.021873	0.054132	43%	111%	212%
361%	SHRP	0.021441	0.052961	42%	108%	205%	347%	COH	0.019414
0.046378	41%	96%	174%	283%	ADVP	0.020596	0.051725	38%	101%	192%
324%	AMGN	0.012494	0.022684	38%	63%	91%	126%	6HOV	0.021409
0.057537	33%	101%	204%	361%	DHI	0.016851	0.042572	30%	77%	140%
226%	APOL	0.014963	0.037758	26%	66%	118%	186%	ANSI	0.014901
0.040206	22%	62%	117%	190%	OCR	0.013569	0.035951	21%	56%	103%
162%	4PHS	0.025633	0.081207	18%	111%	279%	581%	IGT	0.013028
0.035777	18%	52%	97%	155%	5UTSI	0.022231	0.069609	16%	92%	218%
425%	GTK	0.012735	0.036252	15%	49%	94%	152%	SNPS	0.015330
0.046517	13%	59%	122%	210%	CSGP	0.017431	0.054575	13%	67%	148%
267%	RE	0.012670	0.038405	11%	47%	93%	155%	TSS	0.014305
0.044947	10%	52%	110%	191%	DNA	0.030046	0.102005	10%	129%	377%
895%	BER	0.010309	0.032169	7%	36%	71%	116%	8BVF	0.016380
0.054535	7%	58%	134%	247%	URBN	0.017964	0.060487	6%	65%	154%	294%
TTC	0.010435	0.035542	3%	33%	72%	122%	7HAR	0.011024	0.039391	1%
34%	77%	136%	EXLT	0.030785	0.110777	0%	123%	396%	1002%	PSUN
0.012543	0.046600	-2%	37%	92%	169%	NVR	0.008748	0.033586	-3%
24%	58%	101%	9FDS	0.018390	0.069019	-4%	58%	160%	328%	DG	0.017002
0.065576	-6%	51%	142%	288%	BIO	0.016784	0.065011	-6%	50%	139%
283%	NZT	0.007620	0.032871	-7%	17%	49%	88%	10PFCB	0.009606
0.043772	-12%	20%	65%	126%	LXK	0.007660	0.037086	-13%	14%	49%	95%
GYI	0.011275	0.051524	-15%	24%	80%	161%	APPB	0.007565	0.038300
-15%	12%	48%	95%	HTCH	0.010691	0.051542	-17%	20%	74%	153%	FLWS
0.010247	0.051636	-19%	17%	70%	147%	CKFR	0.016229	0.073298	-19%
37%	133%	294%	BSTE	0.014732	0.067981	-19%	32%	115%	251%	ESI
0.009390	0.049361	-20%	14%	63%	133%	HELE	0.012682	0.063428	-23%
22%	93%	206%	KRON	0.009928	0.054289	-23%	13%	68%	148%	WDC	0.018673
0.086337	-24%	42%	164%	392%	CHS	0.009332	0.060743	-32%	5%	62%
152%	DLTR	0.008667	0.063144	-37%	0%	57%	147%	STK	0.003291
0.045494	-38%	-15%	19%	65%	NXTL	0.010929	0.076073	-41%	2%	77%
206%	AMTD	0.013558	0.092159	-46%	4%	102%	293%	IDXC	-0.001469
0.058205	-60%	-39%	-7%	41%	
> Brief explanations:
> 
> 1. The "Exponential Growth" model can be used in mechanical
investing to rank the stocks from any screen or set of screens. When
used on a set of screens, it is similar to (and hopefully better than)
the "Overlap" method. On the assumption that a "good" stock is one
that grows strongly along an exponential path, we calculate the mean
and standard deviation (sigma) of weekly change in log(Price), going
back 26 weeks. We use weekly closing prices, adjusted for splits and
dividends. Thus, a "good" stock should have a high mean and a very low
sigma. The sigma statistic is often called "historical volatility." It
measures the amount of deviation from a purely exponential path. Sigma
can interpreted as a measure of the risk of the stock as an
investment. Values of sigma close to zero suggest that the growth of
the stock will not be erratic in the future, and therefore less risky.
It is only a suggestion, not a guarantee, or even a prediction.
> 
> 2. The next step is to project what the price of the stock will be
one year in the future, under four different conditions:
> --- (a) growth will be two standard deviations below expected (Risk
Averse)
> --- (b) growth will be one standard deviation below expected
(Pessimistic)
> --- (c) growth will occur at the expected rate (Risk Neutral)
> --- (d) growth will be one standard deviation above expected
(Optimistic)
> These four conditions serve to give investors a feeling for where
these stocks will be in the future, if they continue to grow as they
did during the previous 26 weeks. But beware: few stocks continue
their past behavior for very long. Our backtesting research is
designed to measure the predictability of top-rated RS stocks, but the
results are not yet ready.
> 
> 3. Next, projections made under the four above conditions are used
to generate four rankings of these stocks. The ranking implied by
condition (a) is called "Risk Averse" because it uses a severe
adjustment for risk. The ranking for (b) is called "Pessimistic"
because it adjusts the growth for risk. The projected rate of return
in this condition is often called the "Risk Adjusted Return" in the
financial literature. The ranking for (c) is called "Risk Neutral"
because those who use it are not paying attention to risk at all. The
ranking for (d) is called "Optimistic" because investors who seek out
risk and volatility often prefer it.
> 
> 4. Finally, a fifth ranking is generated known as the "Low
Volatility High Growth" (LVHG) screen. This is designed to find stocks
with very low volatility that are nevertheless growing strongly. The
top one or two stocks in this screen may be especially appropriate for
6/3 call options. The theory, still untested, is that option investors
as a class prefer momentum stocks with high volatility, like NEWP and
RMBS. By seeking out those strongly growing stocks that have
rock-bottom volatility, we hope to sneak in "under the radar" to find
options that are dramatically under priced. The LVGH screen is made by
first sorting the entire table for lowest possible volatility (sigma),
then sorting the top ten for highest growth (mean).
> 
> 5. Need more detail? Please visit Loren's website:
> 
> http://www.Aetheling.com/MI
> 
> 
> Best of Luck,
> 
> Jeff


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