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Q: Is this approach considered technical analysis? A: No. The approach is quantitative and algorithmic. It does make extensive use of price and return information and is based on analyses of price and return history over long time periods. The approach does consider some technical measures but primarily to not bet against them. If there are some near-term negative technical signals, Focused 15 Investing will wait before making a positive bet.
Q: Does the approach consider fundamental information? A: No, fundamental information tends to not be available for long enough histories to be considered systematically. We work with many decades of information to assess market resilience.
Q: How do you measure resilience? A: Resilience is based on aggregations of pricing cycles over a number of different periods, ranging from as short as a few days to several quarters. We consider many decades of data and therefore focus on major asset class indexes such as the Dow Jones Industrial Average (usable data begins in 1917) and the S&P 500 (usable data begins in 1950s) because of their long histories.
Q: Trades execute 7 days after signals are generated. Would performance be better if trading took place immediately? A: The signals are calibrated to allow time for implementation — hence the 7-day delay. Performance is not improved by trading early. This is counter-intuitive but true. It is best to be patient and trade the Friday following the publication of the new target weights.
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