On days when the stock index futures are up before the open, certain stocks gap up a lot due to panic buying at the open but once panic buying is over stock will depreciate and mean revert during the day.
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Investment Performance
Investment Return (?):
46%
Volatility (?):
35.5%
Sharpe Ratio:
1.35
Maximum Drawdown:
-15.8%
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 up before the open, certain stocks gap up a lot due to panic buying at the open but once panic buying is over stock will depreciate 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 highs to today’s open are higher 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 up”
Narrow down list of stocks by requiring that their open prices are lower than their 20-day moving average.
Sell the 10 stocks within the list that has highest returns from previous day’s highs.
liquidate all positions at market close
Other Investment Strategy Characteristics:
Investment Type:
Statistical Arbitrage
Investment Risk:
2/5 Low
Backtest Range:
30-40 years
Rebalancing period:
Daily
Investment Strategy Markets:
US Stocks
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