Historical constituents are the hard part. The index is reviewed twice a year, that's around 20 lists to rebuild over the test. Where are you pulling those old lists from, plus financials as originally reported on each date?
I think you are looking at it from a more data-intensive back-testing perspective, whereas my approach is relatively simple and practical.
The focus is on understanding the framework for rebalancing and selecting stocks. Fundamentally, preference goes to companies with positive operating cash flow over the last three years, stable operating margins and manageable debt.
Technically, I look for stocks in Stage 1 or early Stage 2, improving GMMA, strengthening relative strength and signs of accumulation. The preferred RSI range is 30–60, while an RSI below 25 makes a stock a watchlist candidate, not an automatic buy.
But the real question is: where and when do we rebalance, and which stocks deserve a place in the portfolio at that point? That, in my view, is the crux of the entire exercise.
The objective is not to reconstruct historical index constituents for the sake of a back-test, but to develop a disciplined framework that helps investors make volatility work in their favour.
Historical constituents are the hard part. The index is reviewed twice a year, that's around 20 lists to rebuild over the test. Where are you pulling those old lists from, plus financials as originally reported on each date?
I think you are looking at it from a more data-intensive back-testing perspective, whereas my approach is relatively simple and practical.
The focus is on understanding the framework for rebalancing and selecting stocks. Fundamentally, preference goes to companies with positive operating cash flow over the last three years, stable operating margins and manageable debt.
Technically, I look for stocks in Stage 1 or early Stage 2, improving GMMA, strengthening relative strength and signs of accumulation. The preferred RSI range is 30–60, while an RSI below 25 makes a stock a watchlist candidate, not an automatic buy.
But the real question is: where and when do we rebalance, and which stocks deserve a place in the portfolio at that point? That, in my view, is the crux of the entire exercise.
The objective is not to reconstruct historical index constituents for the sake of a back-test, but to develop a disciplined framework that helps investors make volatility work in their favour.