On days when the stock index futures are down before the open, certain stocks suffer a lot due to panic selling at the open but once panic selling is over stock will appreciate and mean revert during the day.
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Investment Performance
Investment Return (?):
8.9%
Volatility (?):
5.9%
Sharpe Ratio:
1.6
Maximum Drawdown:
-5.5%
Investment’s Fundamental Concept:
Stock prices follow geometric random walks in daily time frequency but often mean revert in intraday time frame. On days when the stock index futures are down before the open, certain stocks suffer a lot due to panic selling at the open but once panic selling is over stock will appreciate and mean revert during the day.
Investment’s Logic:
The strategy is executed according to the following rules:
select all stocks near market open whose returns from previous day’s lows to today’s open are lower than 1 standard deviation. The standard deviation is computed using daily returns of last 90 days (close to close). These are the stocks that “gapped down”
Narrow down list of stocks by requiring that their open prices are higher than their 20-day moving average.
Buy the 10 stocks within the list that has lowest returns from previous day’s lows.
Liquidate all positions at market close
Other Investment Strategy Characteristics:
Investment Type:
Statistical Arbitrage
Investment Risk:
1/5 Very Low
Backtest Range:
30-40 years
Rebalancing period:
Intraday
Investment Strategy Markets:
US Stock Index Futures
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