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To partially answer my own question...
Of course, ProFunds are in the business of making money and will be
charging a daily fee. So, I wouldn't expect them to always
match the performance of the underlying index.
I just discovered something else of interest. Their Ultra
funds, which have twice the bang for your buck, have recently been
outperforming what you would expect if you were trading double the
index.
So, this could be a good application for the AB Portfolio Ranker... put
me into the one that is currently outperforming; either 100% of the RUT
or 200% of the RUT, depending on which one is doing the best.
I'll try that concept right now.
At 03:03 PM 1/18/2004 -0500, you wrote:
In
exchange for your formula I'll tell you why...
Seriously, Its because
they don't trade the basket of stocks that comprises the RUT. They trade
using all kinds of instruments. From their site:
"Russell 2000 Index
The Russell 2000 Index measures the performance of the 2,000 smallest
companies in the Russell 3000 Index, representing approximately 8% of the
total market capitalization of the Russell 3000 Index, which in turn
represents approximately 98% of the investable U.S. Equity market. It is
not possible to invest directly in an index.
."
Seems to me that you're seeing
their inefficiency/error in trading. I think they cover this in
their prospectus.
d
From: Chuck Rademacher
[mailto:chuck@xxxxxxxx]
Sent: Sunday, January 18, 2004 2:43 PM
To: amibroker@xxxxxxxxxxxxxxx
Subject: [amibroker] Russel 2000 / Mutual Fund trading
problem
Let's say that I have one of those systems that seems to good to be
true. Relax, I didn't get it from Joe.
It makes 100% per year with a 6% DD. As I said, too good to
be true.
Of course, it makes some assumptions. I designed it to trade
the ProFunds
Small Cap Funds (long and short). The tickers are SLPIX and
SHPIX. I'm
assuming that I will get my buy/short signals just prior to the market
close and that I will enter on the close and that my slippage is going to
be zero. I might add that this is NOT my normal mode of
trading.
Since these funds are supposed to "closely follow" the RUT and
since data
for these funds doesn't go back very far, I used the RUT for my design
and
backtesting. This is where I got the results that were
so good that I
was ready to tell my wife that she won't have to be waiting tables and
the
local pub.
For the final test, I decided to try it on the ProFunds tickers that I
mentioned above. Of course, data for these only goes back to
2002. Well.... since 2002 the system didn't do as well
trading these
funds as it did trading the RUT. The difference was large,
but the
results were acceptable. My wife could switch from full-time
to part-time
work.
My question was/is "why the disparity between RUT and the
corresponding
ProFunds?". I decided to go to the ProFunds site
and see if they have a
comparison of performance between their funds and the RUT.
There it was,
big as could be, the performance of their funds HAS NOT done as well as
the
RUT over the last year or so.
So, the big question. Does anyone know why this is the
case? I will,
of course, ask ProFunds to comment. But I thought that some
of you mutual
fund traders (Fred?) might have a more realistic answer. How
can they say
that these funds track an index when the performance is as much as 10%
different over some quarters?
Please hurry... I'm calling my wife in New Zealand later today and I want
to make sure I have my facts right before I tell her that she can
retire.
Thanks!
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