GROUP 5

Outline  Weekly Group Update  Information gathered this week  Current road blocks  Goals for next week

Information Gathered this week  Table 6  Focuses on the year by year average daily returns of the contrarian trading strategy applied to US common stocks.  The following calculations were made  Average Daily Return for 1998  Return Multiplier for 1998  Required Leverage Ratio 1998

Information Gathered this week  Steps of Code  Step 1: Read only the data from excel file  Step 2: Filter the data for shares with share prices less than $5 and more than $2000  Step 3: Beginning on the first trading day of January 1998, compute the returns for each stock using R it-k., based on what was available the previous day  Step 4: Sum all R it−k for 1998 and divide by the total number of securities.

Information Gathered this week  Steps of Code (continued)  Step 5: Compute the weight for each security  Step 6: Take absolute value of all weights and sum. Then divide N to generate the total dollar investment  Step 7: Calculate the average return

Current Road Blocks  Table 6  Average Daily Return 1998 : 0.57%  Average Daily Return 1998 (our calculation) : 0.41%

Goals for Next Week  Table 6  Check data and code for possible issues with why our average daily return data is off  Once this issue with incorrect average daily return for 1998 is resolved, the code will be used to compute similar results for data as shown in Table 6

Information Gathered this week  Table 2  The goal was to calculate average daily returns for January 1999  Began using Matlab to implement this data  If code created to calculate the average daily returns for January 1999 seemed correct, continue to calculate the data for each year, categorized into deciles

Current Road Blocks  Table 2  In order to calculate the average daily return, must first calculate the market caps and deciles  Thus far, the code will not correctly calculate the market caps.  The values returned for market cap is zero

Goals for Next Week  Table 2  Check data and code for possible issues with why the values returned for market cap are all zeros for January 1999  Once this issue with incorrect market caps for 1999 is resolved, will continue coding to calculate average daily returns, standard deviation of daily returns, and annualized Sharpe ratio

Question??