While January was bliss, February has been a bloodbath.  The graph above illustrates the YTD return of my investment strategy (ParaTopia) compared to the corresponding return if one had bought a piece of the market ( OMX Stockholm 30 index ).  Based on the YTD results so far, compared to the benchmark, my strategy seems to do better in good times albeit worse in bad times.  Looking at the individual constituent performance in Feb’23, everything looks ugly. With ALIV, TEL2, and TELIA (finally!) being the only ones above zero.  

The devil is in the detail they say. And one detail that has been nagging me extra lately is the issue mentioned in A few simple rows – Restated  that I’m still not sure if my model successfully can ensure positive asset weight only. A feature which I believe is essential for having an investment strategy accessible to anyone, and not only hedge funds. As you will see in this post, this issue is an easy fix. Although, the solution was not what I expected.  I will demonstrate two different models for obtaining dynamic and optimal values of theta, followed by two different methods for translating these thetas into asset weight within my portfolio. In total, this will result in four different model+method combinations for which each combination’s portfolio performance is presented in the end. Are you ready? Model A The first model is the one currently used for obtaining the values of theta within my investment strategy up to date. Since I have already shown you all details behind...

This month, I continue buying stakes in ALIV together with primarily ALIV and KINV. My investments are expected to enter the market on Monday, 6th Feb 2023, and the allocation is presented as below.  Again, I use my dynamic investment strategy (see A few simple rows – Restated ). This month, however, the thetas derived by my strategy (-54.6 for dolvol and -2.14 for momentum ) seems truly extreme.  The -54.6 dolvol theta tells me to put as little weight on liquid stock as possible. Meanwhile, the -2.14 momentum theta tells we to invest in past losers rather than past winners. The latter seems a bit controversial strategy wise, don’t you think? 

Although considered the coldest, most poor, and overall worst month of the year, January has been a good month for ParaTopia. Since investing (see New year and Hello ALIV ), my strategy has gained 5% YTD Jan’23. Compared to the market benchmark OMX (only up 1.7%), this seems like a lovely start.  Looking at my strategy on a more individual constituent level, ALIV-SDB.ST has made a striking entry.  Could it be beginner’s luck? Or have my strategy actually made the right choice this time?  

Time for the first investment this year. For January 2023, I continue to use my dynamic investment strategy (see A few simple rows – Restated FMI) which has derived two rather aggressive thetas of -12.75 and 0.99 for Dolvol and Mom , respectively. Above, you see the approximate allocation of stocks to be invested in as of Monday, 9 Jan 2023. I will be glad to welcome ALIV-SDB.ST as a new member of the ParaTopia portfolio. 

 It has been a tough year for a lot of us. From a ParaTopia perspective, there is still a lot of work to do.  My investment strategy, starting in July, has mostly had a performance in pair or below the OMX Stockholm 30 benchmark . Expect the glory days during October and November and a temporary peak in mid-December.   Looking at specific constituents, SINCH.ST has had the most notable transformation, which is also observed in Remember what I said about SINCH.ST? Meanwhile TELIA.ST, TEL2-B.ST, and ERIC-B.ST continues to lag. For more rants about these stocks, see A close cut thanks to communications .  Things to look forward to next year include the follow-up of my latest dynamic investment strategy presented in A few simple rows – Restated. Who knows? Maybe I will finally find out how to optimize my function properly using positive weights only. You should also expect me to sooner or later move from platonic to real investments. Hence, keep your eyes open for...

Things started out just fine for my strategy following the last investment from All I Want For Christmas Is… Telia.ST?! , which entered the market on the 5th of this month. Nevertheless, as presented by the cumulative return below, both ParaTopia and my OMX benchmark faced a significant drop this Friday. You might notice that I am no longer hovering above my nemesis benchmark, albeit being quite close. And although I’m not that sure that I will manage to end on top of the market this year, I remain confident looking forward.  

Below, I show you the number of shares of each stock that my strategy has decided me to invest in as of December 2022. This is the first investment using the Dolvol + Mom (Dynamic) strategy as presented in A few simple rows – Restated   and it is exciting to finally put it into practice.  The dynamic values of theta amounted to -0.94 and 1.05 for dolvol and momentum , respectively. Apparently, TELIA.ST is very popular this month. 

The update for this week shows little difference in performance between my investment strategy, ParaTopia, and the OMX 30 benchmark.  The communication stocks ERIC-B.ST, TELE2-B.ST, and TELIA.ST seem to burden the performance. Meanwhile SINCH.ST remains an evident winner.  

A lot of developments have been made since I first started to open the black box  and shared my investment strategy with you in as in  A few simple rows . Also, as promised, I will today show you the details of my most recent strategy. Namely, the Dolvol + Mom (Dynamic) strategy from Let’s turn the GAS on .  A lot of the things that I show here today are already included in old posts. And for any frequent readers, that may seem a bit repeating. However, since I want everything that I do here to be as open and accessible as possible, I have decided to compile all my most up-to-date work here in one place.  Starting with the method, my investment strategy uses a combination of the parametric portfolio policy  and a generalized autoregressive score  (GAS) model to decide which stocks within the OMX Stockholm 30 Index  to invest in each month.  In essence, I model the asset weights of each stock each month as where 1/N stands for equally weighted benc...