Extraordinary Indexes Bull Market Leaders ... Bear Market Exits!
It's About the Right Tools for the Job
The performance of cars and telephones has improved considerably since Modern Portfolio Theory (MPT) was developed in 1952. Yet MPT’s simplistic “diversify-and-rebalance” mantra remains dominant in the industry. Technology advances occur when additional underlying problems are identified and solved. Since the advent of MPT, we've come to know that (1) there is momentum in market data, (2) noise in market data disrupts the momentum signal and reduces the quality of investment choices, (3) there are known methods for noise reduction, (4) bear markets are different from bull markets, (5) there are multiple forms of hindsight bias, (6) AI tools can both produce and reduce hindsight bias, and (7) risk is not a one-dimensional problem cured by a single dose of diversification. It’s a multidimensional problem, and diversification’s passive risk dilution is only just the start.
SumGrowth Indexes are based on Temporal Portfolio Theory (TPT), a significant extension to MPT that additionally employs temporal (time-based) market data and the cross-disciplinary sciences of Matched Filter Theory, Differential Signal Processing, Adaptive Filtering, Fuzzy Logic, and others. These are the same tools that have enabled WiFi, USB, iPhones, digital TV, assembly robots, and remotely controlled rovers on Mars to perform so well.
"If you want different results, do not do the same things." A. Einstein
A Paradigm Shift
While most Indexes focus on a specific slice of the market, such as a particular sector, factor, theme, or asset class, our Indexes are complete, self-contained tactical portfolio management systems that evaluate dozens of ETFs each month and select a portfolio that seeks to provide the five things investors want most.
Overview of How it All Works
AlphaDroid Portfolio Design Tool
AlphaDroid investment Strategies and Portfolios level the playing field with Wall Street by putting the power of award-winning, high-performance investment algorithms in your hands. Select from among our many readymade Models, or create and edit Strategies and Portfolios of your own design to better address specific client needs.
Briefly How StormGuard Works
StormGuard: Bull-Bear Indicator
Risk is not a trivial problem cured by an ordinary dose of diversification. Our research shows that the most proficient way to reduce risk is through “avoidance” – specifically, avoidance of laggards and bear markets. StormGuard assesses market risk using four key metrics: Price-trend, Market momentum, Value sentiment, and Market volatility.
There are Too Many Trends
Which Trend is My Friend?
The performance of momentum investing depends on its proficiency in extracting trend signals from noisy market data. We employ the cross-disciplinary sciences of Matched Filter Theory and Differential Signal Processing – the same technologies that enable WiFi, USB, iPhones, and remotely controlled rovers on Mars to perform so well.
The Value of a Bear Market Strategy
Defensive Bear Market Strategies
When our StormGuard market direction indicator signals that market conditions have become bearish, its integrated Bear Market Strategy automatically takes charge and substitutes a set of defensive fund candidates and select a momentum leader from among their defensive candidates, such as bond, treasury, and commodity funds.
Two Guard Dogs are Better than One
Momentum Dual Defense
While StormGuard™ is the first line of defense when market momentum fails, TrendGuard™ acts as a second line of defense by further incorporating a Defensive Backstop Model to compete directly for momentum leadership with the Model Portfolio’s candidate funds in order to provide a performance floor if all of the candidate funds are performing poorly.
Merlyn.AI -- A Simplified Visual Demo
Merlyn.AI Genetic Algorithm Portfolios
Merlyn.AI employs genetic algorithms to evolve competing sets of ETF models from which momentum-leading ETFs are identified in a manner that eliminates hindsight selection bias, and our Forward-Walk Progressive-Tuning methodology adaptively tunes our momentum filters – all of which improve the selection of momentum leaders.
A Guided Tour Through Temporal Portfolio Theory
Conquering the Seven Faces of Risk
Conquering the Seven Faces of Risk breaks new ground with its development of Temporal Portfolio Theory as a critically important extension to MPT. The new cross-disciplinary mathematics of electronic signal processing and problem segmentation clarify momentum signals and apply bear market strategies to their separate problem class. Risk avoidance is far superior to ordinary risk dilution.
White Papers
Turnover vs Taxation
The Consequences of Month-End vs 1-Year Trading
This study examines the comparative taxation effects on the value of (1) trading defensive-momentum strategies only at month-end, (2) holding defensive-momentum strategy trades for at least one year, or (3) simply owning the S&P500 Index without trading. Specifically, do the ravages of short-term capital gains taxes negate the benefits of more nimble month-end trading?