VIT-AP inks pact with ALPHABETA Inc
Market euphoria during the pandemic – a cause for concern or an opportunity for the smart investor?
When the central bank governor points out the disconnect between the steep rise in stock markets and the state of real economy, it is time to take notice and act accordingly.
India recently announced Q2 GDP contraction by ~23% for FY2020. And yet, the stock markets have barely blinked. Sectoral behaviours are starkly different – Financials are down ~25%, Tech is up ~20% and Healthcare oscillates in between depending on daily news and updates!! FMCG has been largely flat throughout, as demand for items other than those deemed essentials is still struggling.
Since bottoming out in late March-early April, markets have rebounded almost 40% all across. However, most of…Read more
Cyclically Adjusted Earnings Yield (EPAC Ratio) as a Valuation Measure for Indian Markets
Earnings yield in a layman terms, is computed by dividing the earnings from the asset by the price paid for the asset. Earnings yield for a stock or a market index (which is the inverse of the P/E ratio) gives us the earnings from the share or the index value. In this research, we compare Earnings yield for the broader market index(EY), with the 10 year treasury yield (TY) and validate whether it gives us an indication if the market is overvalued or undervalued. If the spread (TY - EY) between treasury yield and earnings yield is positive, market can be considered as overvalued. And if the spread is…Read more
Gen Z and Financial Services
Affluence and influence of the new consumers
Does Gen Z expect different attributes from financial services? If the answer is ‘yes’, then similar to the changing consumption patterns in other services, market leaders in financial services face the classic dilemma to keep the old guard happy and entice the new blood! Almost a third of Gen Z in Asia spends 6 hours or more per day on their phones. The internet generation or the digital natives as they are referred to, are coming of age and they are going to be a substantial 25% of the population in Asia by 2025. Matching the numbers with their predecessors, the Gen Y (millennials),…Read more
Learning by Playing
Several surveys, research studies and discussions on social media show that Finance and Accounting are among the hardest courses in college, especially among business school majors. There is always debate about which is the harder one. But virtually no argument about them being in the top 3 (alongside Organizational Behavior).
“Hardest course? Money and Finance. It was so hard because the professor was very hard to follow”
Tiff Macklem, Dean of the University of Toronto’s Rotman School of Management
“The toughest course I took at MIT Sloan School of Management was Accounting”
Scott Beardsley, Dean, University of Virginia (Darden)…
Gilt Funds: A cushion for volatile times
The default of IL&FS and DHFL had created a bubble of uncertainity and made investors cautious towards the credit and debt market in 2018. Unfortunately, more was still to come. Recently, the Franklin Templeton fiasco brought into limelight the risks associated with India’s debt market which, above anything else, is highly illiquid. The investors at the time of investment are given the confidence that funds can be liquidated any time they wish to, but the events that happened in 2008, 2018 and now again, have failed to fulfil the promise of the said liquidity.
Investors have been on a “risk-off” mode during the last few weeks. Equities are deemed…Read more
Do – Learn – Apply – Repeat (and a platform that allows that!)
E-learning permeates all spheres of life today, ranging from learning a new language, computer skills, building subject matter expertise to developing life skills. And there are a number of ways, means and practices to impart this education – reading material, prerecorded video lectures, live chat, online sessions, App-based learning and so on. However, studies show that the completion rates for online courses hovers at an abysmal low of around 5-7%. What many course designers and platform creators are not able to materialize is ‘how to keep the learners engaged enough from enrolment to completion whilst maintaining the academic rigour?’ While most platforms and course designers…Read more
A wake-up call for a disciplined investment approach – Will COVID 19 event, bring a positive change in investors behavior?
The need for a disciplined investment approach, with ideal asset allocation and rebalancing strategy is unfortunately realized only when the market goes through a distress time like the current scenario of COVID 19 crisis. While one might argue that, the Global COVID 19 crisis is a Black Swan event, which can’t be predicted, history repeats for itself and the market goes through these cycles and events at least at once in a decade. In 2008, the liquidity crisis and now in 2020, with the COVID-19 crisis, Investors with huge allocation to equity and retiring in 2020 and 2021, are caught off handed with the fall in the market value of…Read more
Accruals as an Investment Strategy
Informed decision and data helps in keeping check on one's emotions while investing. One of the insights that you get from constant back testing on different data sets is the importance of accruals in screening the stocks for investment. Generally, investors value the businesses primarily on their earnings power. Richard Sloan in 1996 documented “Accrual Anomaly” where he found that stocks of companies having low or negative accruals outperform the companies having high accrual.
Using ALPHABETA simulate module, I back-tested the NSE-100 stock universe (India Market) from June 2014 till date and found that the low accrual stock group consistently performs better than the high accrual stock group. The groupings were…Read more
Pairs Trading - Performance Tracker
Following screenshots show the updated performance(12 March) of Pairs Trading portfolios in Indian and US markets. These portfolios were created by ALPHABETA on 31 December. You can find our last week’s pairs trading blog on US markets here and Indian markets here.
Pic: Pairs Trading Portfolio Performance (US markets - DOW) as on 12 March
Pic: Pairs Trading Portfolio Performance (India - NIFTY50) as on 12 March
As you can see from the screenshots, even after the markets being highly volatile, both the portfolios are on the positive side in terms of cumulative returns. Sharpe ratio…Read more
Pairs Trading Within the Dow
We posted Pairs Trading results for Indian Markets yesterday here. Today we are following up with the Dow results. Pairs Trading strategy has been used over the years by Institutional fund managers as well as hedge funds to generate positive returns during times of uncertainty in the markets. Also during periods of flat markets, pairs trading historically has performed well.
The results of the live virtual Pairs Trading portfolio which we created on 31 December is shown below. We allocated USD 200,000 to the portfolio. The results are updated as of 9th March.
Pic: Pairs Portfolio Performance (from 31 Dec to 9 Mar)…Read more