Several interesting changes took place in some of the core indicators that I track to gauge broad market health during the past couple of days which I’d like to share with you. The JSE indices provide a very warped view of the market due to their cap-weighted construction which assigns …
Category: Risk Management
You have no doubt by now heard about the market debacle which is Steinhoff. The price of the company dropped by an astounding -82% in the past five days, destroying hundreds of millions in value. Given the broad inclusion of the stock in the professional asset management space (unit trusts, …
Mean reversion strategies rely on the premise that extremes in price eventually revert to the mean price over time. They are effective during established markets – bull, bear or sideways – but unfortunately do not perform well during market regime changes or tail events. Tail events are outcomes that have …
The Sharpe Ratio A well-known and often quoted measure of risk is the Sharpe ratio. Developed in 1966 by Stanford Finance Professor William F. Sharpe, it measures the desirability of an investment by dividing the average period return in excess of the risk-free rate by the standard deviation of the …
One of the inputs I rely on to control risk is the simple moving average, more specifically, the 200 day simple moving average. This is a deceptively simple technique, but don’t be misled. The quantified results of this indicator make it one of the easiest and most powerful filters around. …