We all like free stuff. We have been busy bees compiling research to make some informed decisions for our 2010 strategy. Here are a few pieces of research we have prepared which we are sharing as our New Years gift to our blog readers. In the future you can find both under the Tools tab above.
Risk Ratios Analysis CLICK HERE
This analysis covers about 60 ETFs and will be updated monhtly. This spreadsheet takes a look at downside risk, Sortino ratios, volatility skewness and for those of you still stuck on modern portfolio theory we have thrown in standard deviation. Our assumptions for the spreadsheet is a minimum acceptable return (MAR) of 6% annually and a risk free rate of return of 1%. For most of the ETFs we based the stats on 36 months. The analysis is through November 2009. If you are scratching your head asking what are these stats, there are definitions at the bottom of this page.
People look for many scenarios in the numbers. One scenario I like is high volatility skewness, high mean monthly return, high Sortino, and low downside risk. I will give you a hint iShares Global Consumer Staples. Enjoy!
World Leading Exporters Economic Analysis CLICK HERE
Updated annually this file gives details such as Export Rank, Import Rank, External Debt, Current Account Balance, Literacy Rate, GDP, Per Capita GDP, Economic Freedom Rank, Financial Development Rank, Human Development Rank, LIfe Expectancy, and G20 member status. Why all this? All of these are important details when selecting a country specific ETF.
Definitions for the Risk Ratio Analysis
Downside Risk – is the annualized standard deviation of returns below a target return. This is a more useful statistic than standard deviation that looks at both good returns and bad returns. The lower the better.
Sortino Ratio – measures the risk adjusted return of an investment asset, portfolio or strategy. It is a modification of the Sharpe Ratio but penalizes only those returns falling below a user-specified target, or required rate of return, while the Sharpe ratio penalizes both upside and downside volatility equally. The higher the better. Sortino’s are negative in quite a few as we have gone through extraordinary losses in the time frame analyzed.
Volatility Skewness – measures the ratio of a distribution’s percentage of total variance from returns above the mean, to the percentage of the distribution’s total variance from returns below the mean. The higher the better.
Standard Deviation – In simple terms, it shows how much variation there is from the “average” (mean). OUr standard deviation is of monthly returns not annual.
Mean Monthly Return – is the average return for the last 36 (or since inception) months. The higher the better.
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