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I'm coming from the VectorVest world, and a number of pick strategies (as
distinct from timing methods) that backtest quite well have low "RT" as a
component. RT is roughly C / MA(C, 65), though I think it is modified
somewhat by other things. the rationale behind low RT is sometimes discussed
in more lofty terms, but mainly it's just that they test out well.
interestingly, low RT is often a part of both long and short strategies.
my impression, though I haven't fully tested it out, is that these
strategies do well at the start of a significant rise or fall, but less well
after that. this makes sense, because you're essentially buying
beaten-down-ness, the special value of which fades after a while.
dave
> I completely agree with what you found interesting about negatively
> weighting the latest performance. The philosophy there (as I'm sure
> you already know) is that stocks that have advanced significantly in
> the most recent quarter are ready for a pullback, and those which
> have already pulled back, but have been bouncing upwards before that
> are ready for rallying again. Personally, I don't use negative weight
> for the most recent performance, FWIW, because it interferes with
> rest of my strategy, but I agree with the logic. It makes sense for
> certain type of strategies.
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