Quant Investing


Here are the Q1 2017 total return and max drawdown numbers for the various quant strategies I track. For explanations of the various quant strategies see the  portfolios  page. All equity portfolios consist of 25 stocks and were formed at the end of 2016. No changes in the holdings since that time (except for the TAA Bond strategy which re-balances every 4 weeks).

In the table below I list various quant strategies along with their YTD performance and drawdowns. Also, listed are various benchmark indices. All performance numbers are from Portfolio123.com .

Overall, the equity quant strategies underperformed both domestic and foreign stock indexes. After a gang buster 2016 this should be somewhat expected. The microcap quant strategy lead the pack with an impressive 18% return for the quarter while TV2 lagged at -1.38%. The utility value strategy also did very well with an impressive 8.05% return despite all the hand wringing over higher rates.

I also listed a couple of variations on a few of the quant strategies. I show the Utilities Value strategy using the variation in the VC2 composite where I leave out P/B . It performed slightly better than the standard strategy. Going forward I will only use the strategy with the new value composite, with no P/B.

The foreign stock versions of VC2 and TV2 did significantly better than the standard versions which makes sense when you see the outperformance of VEU vs SPY. We could be seeing a change in leadership between US stocks and Foreign stocks. Foreign stocks have started to show up in the top holdings of some of the more aggressive TAA strategies, like AGG3. Another month or two of this kind of relative performance and we’ll even see a shift in GEM to foreign stocks. We’ll see.

On the bond side of things the TAA Bond 3 and Bond 1 strategy beat their benchmarks quite handily. The TAA Bond 3 strategy is available on AllocateSmartly as well.

That sums up the quant strategy performance for the first quarter of 2017.


2 thoughts on “ Quant strategies: Q1 2017 performance update

  1. Great blog!

    I have been thinking on a few options on how to handle dividends in a quant strategy like Trending Value. The first one is to reinvest the dividend every time one get them in the same stock that paid it out. The second one is to keep it in cash until it’s time to re-balance the portfolio, normally, once a year.

    I have two rolling TV portfolios, holding 10 stock each which are rebalanced 1st of January and 1st of August. Dividends in Sweden are commonly paid out between March and May and I don’t like the idea to reinvest in a stock in May which might be sold in August.. But I don’t like to stay in cash either since I want my TV portfolio to be 100% invested in equities..

    How do you handle dividends in your quant portfolio? And do you know how it is handled in the backtests you have presented?

    1. Hey Kristian, I re-invest all my dividends in my quant strategies. It’s done automatically at zero cost. All backtests assume dividends are re-invested in the same stocks.


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