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Starting an investment business - Page 14

post #196 of 273
Thread Starter 
Anyone who would like a copy of our pitchbook is welcome to it. We appreciate any feedback, and of course it never hurts to have it out there circulating to more people who might be interested in giving us some cash. biggrin.gif
post #197 of 273

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Edited by merkur - 6/28/12 at 2:07am
post #198 of 273
Thread Starter 
Quote:
Originally Posted by merkur View Post

Where did you get the year's worth of stock price data to backtest your algo's? Did you have to pay for it?

Nope. We just used publicly available EOD data. We only open and close positions at market open and market close anyway, so it works out fine.
post #199 of 273
Quote:
Originally Posted by merkur View Post

Where did you get the year's worth of stock price data to backtest your algo's? Did you have to pay for it?

All of the opening and closing prices are publicly available information on exchange websites/yahoo finance.

If you want intraday backtesting that would of course require a dedicated service provider.
post #200 of 273
Quote:
Originally Posted by NameBack View Post

Anyone who would like a copy of our pitchbook is welcome to it. We appreciate any feedback, and of course it never hurts to have it out there circulating to more people who might be interested in giving us some cash. biggrin.gif

I'd like to see it smile.gif

How has the fund been doing in real time trading
post #201 of 273
Thread Starter 
Quote:
Originally Posted by CYstyle View Post

I'd like to see it smile.gif
How has the fund been doing in real time trading

Shoot me your email in pm. too large a file to send by pm.

The fund has returned 10% in four months of live trading, beating the Barclay Hedge Fund Index over the same period by 4.5%
post #202 of 273
Quote:
Originally Posted by NameBack View Post

I'd say our fundamental conceit is pretty simple. Instead of trying to predict market movement, we try to accurately gauge which of a set of simple trading strategies is currently effective, and assume that said strategy will continue to be effective into the very near future. We take a computationally intensive task (predicting price movement), and reduce it to a simpler task (accurately assessing current performance). Everything else is built on that fundamental idea. I don't consider that proprietary.
My gut reaction as to why we did this where no one else is? Well, for one, there might be quant firms out there doing similar things -- it's hard to know for sure since it's all so proprietary. However, I think it is generally a very novel strategy, and I think our non-finance background is our edge. We weren't boxed in by pre-existing beliefs about where the good trades to make are, or what the limits of quantitative analysis are. Most quant firms treat the idea of machine learning directly influencing trades as a fairy tale. We didn't see any reason to take that point of view. I think that's what led to our success.

I'm sure you get that question a lot lol. Work on a really persuasive answer to skeptical investors smile.gif I think things like the non-finance background may scare people. First thing that'll scare people is your age. Investors like and trust older people even if they have mediocre results and are just as likely to fail or steal money. To add non finance and young in age and people will be running for the exits. Unfortunately there's been 2 major crashes in this last decade,
post #203 of 273

Asian and European investors are much more focused on results than appearances, unlike most American investors.  Asian investors are also more likely to take a risk with people with a non-traditional background because they usually diversify across multiple funds.

 

aka focus on that Asian market.

post #204 of 273

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Edited by merkur - 6/28/12 at 2:06am
post #205 of 273
Does your model account for the fact that for quite some time now the Indian G-sec curve has been inverted at 5y-10y (a spread of around 10 basis on an average), which reflects that the market is worried about inflation and liquidity in the shorter to medium term but does see inflation cooling with time and expects the growth also to slowdown, which was recently supported by the lower GDP growth numbers. From the current hawkish stance of the RBI it is pretty much clear that the central bank is ready to sacrifice growth in order to tame inflation and I expect that would play havok with your results, unless your back-testing shows that you can equilibrate between diverging affects of long-tail, short-wedge hedging.
post #206 of 273
Maybe instead of fundraising just try to get a prop firm to back you and give you a slice post-expenses. If you are running a fund, you're looking at 2 & 20 at best, and given you have no track record it will probably be worse. An established prop firm can probably cut you and your partner in on 20% - 50% of your P&L. Also, half the groundwork will be laid with respect to infrastructure / compliance / etc.
post #207 of 273
Thread Starter 
Quote:
Originally Posted by dopey View Post

Does your model account for the fact that for quite some time now the Indian G-sec curve has been inverted at 5y-10y (a spread of around 10 basis on an average), which reflects that the market is worried about inflation and liquidity in the shorter to medium term but does see inflation cooling with time and expects the growth also to slowdown, which was recently supported by the lower GDP growth numbers. From the current hawkish stance of the RBI it is pretty much clear that the central bank is ready to sacrifice growth in order to tame inflation and I expect that would play havok with your results, unless your back-testing shows that you can equilibrate between diverging affects of long-tail, short-wedge hedging.

Why do you expect it would play havok with our results? Especially considering we only trade domestic equities?
post #208 of 273
Quote:
Originally Posted by NameBack View Post

Why do you expect it would play havok with our results? Especially considering we only trade domestic equities?

+1

Unless the equities you're trading have significant structural exposures to India i.e. suppliers, clients, partnerships then the yield curve in India has no real impact on your strategy.

He isn't doing a LTCM and making cross-country convergence trades here.
post #209 of 273
Quote:
Originally Posted by NameBack View Post

I'd say our fundamental conceit is pretty simple. Instead of trying to predict market movement, we try to accurately gauge which of a set of simple trading strategies is currently effective, and assume that said strategy will continue to be effective into the very near future. We take a computationally intensive task (predicting price movement), and reduce it to a simpler task (accurately assessing current performance). Everything else is built on that fundamental idea. I don't consider that proprietary.
My gut reaction as to why we did this where no one else is? Well, for one, there might be quant firms out there doing similar things -- it's hard to know for sure since it's all so proprietary. However, I think it is generally a very novel strategy, and I think our non-finance background is our edge. We weren't boxed in by pre-existing beliefs about where the good trades to make are, or what the limits of quantitative analysis are. Most quant firms treat the idea of machine learning directly influencing trades as a fairy tale. We didn't see any reason to take that point of view. I think that's what led to our success.

Sounds like a perfectly valid momentum trade. You might find this paper interesting or worth a citation:
Quote:
Title: Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency
Author(s): Narasimhan Jegadeesh, Sheridan Titman
Source: The Journal of Finance, Vol. 48, No. 1 (Mar., 1993), pp. 65-91
Publisher(s): Blackwell Publishing for the American Finance Association
Stable URL: http://www.jstor.org/stable/2328882
Abstract: This paper documents that strategies which buy stocks that have performed well in the past and sell stocks that have performed poorly in the past generate significant positive returns over 3- to 12-month holding periods. We find that the profitability of these strategies are not due to their systematic risk or to delayed stock price reactions to common factors. However, part of the abnormal returns generated in the first year after portfolio formation dissipates in the following two years. A similar pattern of returns around the earnings announcements of past winners and losers is also documented.

I'll pm you my email address. I'd love to see the prospectus.
post #210 of 273
Thread Starter 
Thanks for all the interest, guys. Everyone who's received the pitchbook: please feel free to pass it along to any rich folks you know. biggrin.gif

Anyway, just a brief update today. Since implementing the improved system on Monday, we have cleared about 3.9% in realized returns. Obviously this is just half a week, but it's always nice to start out strong.
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