PureBytes Links
Trading Reference Links
|
Yes, b,
I believe that there is still one thing you are missing.
<FONT face=Arial color=#0000ff
size=2>
I think
you are missing the following potential problems in even a long-only
system:
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>1. A long-only system will exit with (what it thinks is) a stop
loss on even a 5-10% dividend payment, let alone a 50% one. In
reality, you should not have been stopped out as there has been no "real"
loss.
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>2. If you are buying oversold stocks (as your systems and mine seem
to do frequently), a large dividend payment can surely make a particular stock
appear to be oversold. Your system buys it even though it is
probably overbought, not oversold, as a result of investors getting in to
capture the dividend.
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>3. If your long-only system would have bought a stock with a nicely
rising price that suddenly has ANY amount of dividend payment,
the indicator you are using won't give you a proper signal.
<FONT face=Arial color=#0000ff
size=2>
Let's
try to be realistic, however. In a system that trades the whole
universe of stocks and does thousands of trades, the large number of trades
can bury such anomalies.
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>However, if you are backtesting over a small basket of stocks (N100) and
you encounter one or two of these situations, it can leave you with the
impression that the system is not worthwhile. This scenario can also
account for why removing one stock (old N100 stock) and replacing it with
another can have a significant impact.
<FONT face=Arial color=#0000ff
size=2>
All of
the above are reasons why I prefer to backtest over a large universe of
stocks over several years of data with thousands of trades.
<FONT face=Arial color=#0000ff
size=2>
Yet, I
still prefer to incorporate the dividends into my trading systems.
As I said, my own systems (written in C++ and Delphi) properly (IMO) account for
dividends. It would be very difficult for AB to cater for this
situation due to the very large number of data vendors and methods
involved.
<FONT face=Arial color=#0000ff
size=2>
As I
mentioned in one of my earlier posts, there aren't enough AB users who
appreciate the problem and are prepared to do the work to eliminate
it.
<BLOCKQUOTE
>
<FONT face="Times New Roman"
size=2>-----Original Message-----From: b
[mailto:b519b@xxxxxxxxx]Sent: Thursday, January 08, 2004 3:32
PMTo: amibroker@xxxxxxxxxxxxxxxSubject: RE: [amibroker]
dividend (more on the subject)Chuck, I was
just thinking of long systems. For long systems the worst that could happen
isthe 50% drop would trip an exit stop and cause one to sell early (but no
loss theresince one gets the other 50% as a cash dividend in one's
account). I suppose theremight be an opportunity loss by being stopped out
of the trade, but one's systemmight regain that opportunity by buying
another stock.But short systems would be another matter entirely. The
big dividend could triggerfalse entries which I think would have a larger
impact on results that a prematureexit. Opps, I just remembered a
painful experience when a large dividend did cause me aloss in a long
trade. Here is how it happened. When the news of the extraordinarydividend
came out, the stock began to rise and it continued to rise until the
dateof record for the dividend payment came. Then as now I did not look at
any news butbought the stock based on its price action (looked like a
substantial breakout tothe upside). I got in on the day after the date of
record on what appeared to be asmall correction (buy the dips, right!) -
Ouch. Since I was using a mental stopbased on EOD data, the stock was way
down before I entered my sell order the nextmorning.However, that
experience is likely very unusual. If I had entered a couple of
daysearlier, I would have got the cash dividend that would have made up
for the pricedrop. As I see it (still thinking the whole issue
through so I may change my mind), takingdividend data into account can be
important for evaluating the profit of longsystems with very long holding
periods, and for short systems using break outs forentries. Dividend data
would be less important (not totally un-important, just lessimportant) for
short-term long systems. Is there more to this than I am seeing?
b--- Chuck Rademacher <chuck_rademacher@xxxxxxxxxx>
wrote:> b> > I hate to be a bit pedantic, but even a
short term trader is affected by> these distortions.
Imagine the effect of a 50% in the price of any stock> on today's
chart. If you owned the stock, you would have 50% cash (or stock>
in another company) and your original shares worth 50% of what they
were> worth yesterday. However, what did the 50% drop in
price do to your short> term indicators? It would look like one
SERIOUS breakout to the downside.> Yes, you may go and look at the
chart. But that's not what happens in> backtesting a
mechanical system, is it?> > Assuming that you backtest over a
few years, even a very short term trading> system will encounter many
of these distortions.> > Can you see the
problem?__________________________________Do you
Yahoo!?Yahoo! Hotjobs: Enter the "Signing Bonus" Sweepstakes<A
href="">http://hotjobs.sweepstakes.yahoo.com/signingbonusSend
BUG REPORTS to bugs@xxxxxxxxxxxxxSend SUGGESTIONS to
suggest@xxxxxxxxxxxxx-----------------------------------------Post
AmiQuote-related messages ONLY to: amiquote@xxxxxxxxxxxxxxx (Web page: <A
href="">http://groups.yahoo.com/group/amiquote/messages/)--------------------------------------------Check
group FAQ at: <A
href="">http://groups.yahoo.com/group/amibroker/files/groupfaq.html
Yahoo! Groups Links
To visit your group on the web, go to:<A
href="">http://groups.yahoo.com/group/amibroker/
To unsubscribe from this group, send an email to:<A
href="">amibroker-unsubscribe@xxxxxxxxxxxxxxx
Your use of Yahoo! Groups is subject to the <A
href="">Yahoo! Terms of Service.
Send BUG REPORTS to bugs@xxxxxxxxxxxxx
Send SUGGESTIONS to suggest@xxxxxxxxxxxxx
-----------------------------------------
Post AmiQuote-related messages ONLY to: amiquote@xxxxxxxxxxxxxxx
(Web page: http://groups.yahoo.com/group/amiquote/messages/)
--------------------------------------------
Check group FAQ at: http://groups.yahoo.com/group/amibroker/files/groupfaq.html
Yahoo! Groups Sponsor
ADVERTISEMENT
Yahoo! Groups Links
To visit your group on the web, go to:http://groups.yahoo.com/group/amibroker/
To unsubscribe from this group, send an email to:amibroker-unsubscribe@xxxxxxxxxxxxxxx
Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service.
|