GalaTime

We have put out a newer version of the Moneyoga site, along with a bunch of new features. Check out this set of posts at the Moneyoga Blog for details:

Feedback, Questions & Answers - Part 4

It has been two months since we last responded to the plentiful - and very helpful - feedback that we continue to receive from Moneyoga users. Do check out Moneyoga.com for a bunch of new features, as well as an updated FAQ. As for your latest suggestions, here goes:

Site Redesign: Better Navigation, Help Pages

Along with new features like F&O analytics, Sector classifications, Watch lists, etc. we have also redesigned the interface at Moneyoga to help users access our content as efficiently as possible. The header now features three sections:

1. Analytics
2. Commentary
3. Community

New Features: Sectors, Watch List, Bonus & Split Candidates

In continuation of our recent series of blog posts, this one will elaborate on three new feature additions at Moneyoga:

• Sector classification for F&O-able stocks
• Daily watch list
• Bonus & split investment strategy

New Feature: Futures & Options - Snapshot & Analytics

As you may have noticed, we have re-designed the Moneyoga site - navigation has been made easier, and there are a bunch of new features for our users. We’ll explain the main ones in a series of blog posts, starting with this one featuring:

• Futures & Options Snapshot
• Futures & Options Analytics

Check out this recent post at the Moneyoga blog: Buying Bonus & Split Candidates: A Profitable Investment Strategy?

We ran a series of tests on historical price data for all NSE stocks. Each time a company declared a bonus or a split, we invested a fixed amount. We held it for a certain period, and then computed the percentage return. At the end of the entire test period, we compared the net return for this strategy (and the worst drawdown) with that for the Nifty-50 index.

I’m out of town most of next week, and blogging will be on hold until Saturday, December 22nd.

If you haven’t already, check out Moneyoga.com. And watch out for a post on an investment strategy at the Moneyoga blog - we’ll talk about the best approach to trading stocks that have declared a bonus or a split.

Via Paul Kedrosky, detailed global capital market statistics put out by Securities Industry and Financial Markets Association (SIFMA).

Click images for full resolution.

Global Securities Industry Revenues, by Country or Region

Value of Equity Shares Traded

Largest Derivatives Exchanges by Number of Contracts Traded

Global Net Assets of Mutual Funds, by Region

Here is a table that shows how the BSE-Sensex 30 large cap index has lagged the BSE MidCap & SmallCap indices this month:

I’ve normalized all values to 100 on Nov 1: the Sensex is pretty much unchanged, while the mid/small cap indices were up 7-8% as of Friday. The story is the same today: while the Sensex-30 & Nifty-50 indices are up a bit, the mid-cap & small-cap indices on both the BSE & NSE are up almost 3%. While the Sensex remains below its all-time high, the smaller-cap indices have been regularly hitting new highs.

Let’s see . . . retail investors driving up small-cap stocks by double-digit percentages every day. Sounds like we might be getting carried away a bit.

I’m glad to share the news that we have managed to crank out the second round of features at Moneyoga.com within a month of the Beta launch in mid-October. Here are the latest attractions:

• Moneyoga Market Metrics
• Stock Screens:
  • Top Gainers & Losers
  • New Highs & Lows
  • Moving Average Crossovers
  • Volume Breakouts
  • Sales & Earnings Growth
• Current Month Option Chains

The stock screens help you find stocks that are worth further investigation - for eg, the top gainers over the past 1 day or week, or stocks breaking up/down on above average volume, might be good candidates for a short-term momentum strategy.

For those of you keen on fundamentals, check out the Sales & Earnings Growth screen - it lists stocks with both the highest sales growth over the past year, as well as those with the best EPS growth.

In all cases, we separate out stocks that have Futures & Options available - these stocks can be traded multiple ways. Another minor, but neat, feature is that each stock page at Moneyoga now shows one or more screens that contain the stock.

[See Deepak's post for a detailed explanation of each screen.]

Yet another feature (probably launched for the first time in India) is the Option Chain, an example of which is shown below:

The table lists all active call & put option contracts for the Nifty-50 index; it’s formatted such that the middle column lists strike prices in increasing order. At a glance, you can tell which options are the most liquid, how much it would cost to put on a straddle or spread position, and so on.

Unfortunately, since a lot of option contracts (even for the current month) are illiquid, we do not always get quotes from the NSE for those. In such cases, we have put in a question mark (?).

Note that clicking on any of the values in the ‘Premium’ column takes you to the NSE page for that specific option contract - there, you can check the option’s bid/ask spread, implied volatility and such. Also, the rows highlighted in green show calls / puts that are currently in the money.

Last - but not the least - is the Moneyoga Market Metrics page: a one page summary of the universe of stocks traded on the NSE. The idea is to capture market internals using a variety of breadth measures, such as -

• Number of Advances & Declines
• Number of New Highs & Lows
• Number of Stocks above/below their Moving Averages

Note the format used: The current value for each metric is listed in green / red (depending on whether it’s bullish or bearish). Below it, you see three numbers in brackets, which are the Minimum, Average & Maximum values of that metric since June 1, 2007.

If you mouse-over any of the green / red numbers (with the mouse icon to the left), an image pops up to the right; it charts the trend in that breadth measure, like so:

I encourage you to check out all the new features, and share your thoughts to help us continuously improve the site. Also, we have put out a new post on the Moneyoga blog that captures the recent round of user feedback & our comments.

While there are tons of foreign hedge funds that use quantitative trading / investment strategies (indeed, some of them were in the public eye during the August credit crunch), there seem to be very few (if any) quantitative funds in India. At Moneyoga, we certainly are partial to the quant approach and have shared our plans to develop advanced analytics, system-based strategies and such.

What is interesting is that Lotus India AMC has just launched an NFO for its quant-based Agile Fund. They claim that it is India’s 1st - while there may be proprietary funds doing quant-stuff in India, Lotus certainly seems to be one of the earliest to bring it to the public.

Highlights:

• AGILE stands for Alpha Generated from Industry Leaders. It’s a Scheme which invests in equity shares using a mathematical model. The parameters which define the universe of stocks eligible for investment are designed to shortlist only companies that are amongst the leaders in their respective industries.
• The model used in the Lotus India AGILE Fund uses momentum strategies to construct its portfolio. A momentum strategy is based on the premise that over long periods of time, stocks which have been performing well on various parameters in the past will continue to perform well in the future. It has been observed that any momentum strategy works best in a portfolio of concentrated stocks. Indeed, the test data for the past few years corroborate this fact.
• While the investment pattern of the scheme permits the use of derivatives, the scheme will use the same only if they provide a tangible
  advantage vis-à-vis cash stocks. Derivatives will not be used for hedging purposes.

Now, I’m quite excited about the fact that quant-based approaches are making their way to the Indian markets; the Moneyoga business model is geared to particpate in this growth. But given that the September-October period saw a very sharp mo-mo rally - something that occurs probably once in four years - I think a momentum-based long-only large-cap quant fund may be a bit off in terms of timing.

While I am a believer in data/system-based trading and backtesting, the law of ever-changing cycles makes me look at any quant strategy very carefully - the nature of the market can change quickly and make a strategy unprofitable. The key is to have a whole bunch of strategies in your arsenal, and pick the ones well suited to the current/expected market environment.

Unfortunately, the Agile Fund can’t do this - for example, if we were to enter a bear market, they can’t switch to a short-only strategy. While they do claim to beat the Nifty-50 index since 1997 (including bear markets), it does not matter to me as an investor - what I am interested in are absolute (positive) returns, not relative (less negative) returns!

Some of you may have noticed the ‘Beta’ launch of Moneyoga.com; if not, do check it out. We appreciate your feedback on style, content, speed, and such.

Also, be sure to read the What we do page - it’ll give you a good idea of where we are headed as a company, and what you can expect to see over time.

CXO Advisory Group has yet another enlightening post on option trading strategies: Strategies for Investing in Options of Individual Stocks:

In their September 2007 paper entitled “Firm Specific Option Risk and Implications for Asset Pricing”, James Doran and Andy Fodor examine the benefits and costs of 12 basic strategies for augmenting an initial investment in a group of stocks with systematic investments in the associated options.

Sample conclusions:

No long options strategy outperforms the stock-only benchmark portfolio over the entire sample period. Even in a bull market, long call option positions offer little to no portfolio enhancement, and the risk reduction of puts does not offset the costs of purchasing them.

There can be significant positive net benefit from selling puts, again depending on amount of leverage used. Investors will pay a premium to hedge against firm-specific price drops.

Other tests indicate that gains from selling puts relate to idiosyncratic (stock-specific) volatility and not market volatility.

At Moneyoga, we intend to test the viability of such strategies for the Indian market, now that we have access to historical F&O data and are developing a strategy testing platform.

I’ve had my hands full with all the programming work that needs to get done for us to launch Moneyoga next month; so instead of useful investing/trading links, here are some screens-shots purely for your entertainment!

Bloomberg Blooper:

I’ve highlighted it in yellow: “The following stocks may rise or fall in Mumbai today”. Really ?! Wow, what a market prediction - unbeatable!

Housing @ Bangalore Craigslist, the domain of real estate brokers:

Only ‘excellent’ stuff out here - nothing less will do in Bengaluru. Yes, I checked - they are all from the same broker