1. 328 Central Avenue, Harrison, NJ 07029
Name Position
Chang Liu Trader
Wei He Trader
Kairui Huo Risk Manager
1

2. 2

3. 3

4. 4

5. [1] Murphy, John J. Technical analysis of the financial markets: A comprehensive
guide to trading methods and applications. Penguin, 1999.
[2]丁鹏. 量化投资: 策略与技术. 電子工業出版社, 2012.
[3] “Introduction toTechnical Indicators and Oscillators”
(http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:
introduction_to_technical_indicators_and_oscillators)
a) For historical constituent lists of the S&P 500,go toWRDS.
b) For historical stock prices of our stock pool, we download data from
http://finance.yahoo.com/ by Python.
c) To realize the purpose of Dollar Neutral, we use IVV (iShares Core S&P 500)
to hedge.
5

6. 6

7. SP500 Index Historical Constituents

8. RSI compares the average price
change of the advancing periods
with the average change of the
declining periods. Early signaling
for entry and exit is the main
benefit of RSI.
A leading indicator is thought to be
the strongest during periods of
sideways or non-trending trading
ranges, while the lagging indicators
are regarded as more useful during
trending periods.
MACD Line: (12-day EMA - 26-day EMA)
Signal Line: 9-day EMA of MACD Line
MACD Histogram: MACD Line - Signal Line
RS: N days’ AveGain/N day’s Ave Loss
RSI: 100-100/(1+RS)

9. MACD Line: (12-day EMA - 26-day EMA)
Signal Line: 9-day EMA of MACD Line
MACD Histogram: MACD Line - Signal Line
RS: N days’ AveGain/N day’s Ave Loss
RSI: 100-100/(1+RS)
Long Signal:
1. MACD line > 0 And
2. MACD Histogram > 0
Short Signal:
1. MACD line < 0 And
2. MACD Histogram < 0

10. MACD Line: (12-day EMA - 26-day EMA)
Signal Line: 9-day EMA of MACD Line
MACD Histogram: MACD Line - Signal Line
RS: N days’ AveGain/N day’s Ave Loss
RSI: 100-100/(1+RS)
When to Close a Position?
If Long:
1. RSI(-1)>Critical Value AND
RSI(0)<Critical Value; OR
2. MACD Histogram < 0

11. MACD Line: (12-day EMA - 26-day EMA)
Signal Line: 9-day EMA of MACD Line
MACD Histogram: MACD Line - Signal Line
RS: N days’ AveGain/N day’s Ave Loss
RSI: 100-100/(1+RS)
When to Close a Position?
If Long:
1. RSI(-1)>Critical Value AND
RSI(0)<Critical Value; OR
2. MACD Histogram < 0

12. MACD Line: (12-day EMA - 26-day EMA)
Signal Line: 9-day EMA of MACD Line
MACD Histogram: MACD Line - Signal Line
RS: N days’ AveGain/N day’s Ave Loss
RSI: 100-100/(1+RS)
Long Signal:
1. MACD line > 0 And
2. MACD Histogram > 0
Short Signal:
1. MACD line < 0 And
2. MACD Histogram < 0

13. MACD Line: (12-day EMA - 26-day EMA)
Signal Line: 9-day EMA of MACD Line
MACD Histogram: MACD Line - Signal Line
RS: N days’ AveGain/N day’s Ave Loss
RSI: 100-100/(1+RS)
When to Close a Position?
If Short:
1. RSI(-1)<Critical Value AND
RSI(0)>Critical Value; OR
2. MACD Histogram > 0

14. MACD Line: (12-day EMA - 26-day EMA)
Signal Line: 9-day EMA of MACD Line
MACD Histogram: MACD Line - Signal Line
RS: N days’ AveGain/N day’s Ave Loss
RSI: 100-100/(1+RS)
When to Close a Position?
If Short:
1. RSI(-1)<Critical Value AND
RSI(0)>Critical Value; OR
2. MACD Histogram > 0

15. 15

16. 16

18. MA_RSI Ann.Ret Ann.Std Sharpe Max DD
8_75 23.52% 19.90% 1.18 28.88%
8_80 22.26% 21.22% 1.05 32.17%
8_85 25.96% 19.96% 1.30 30.53%
9_75 28.35% 28.36% 1.00 28.45%
9_80 22.49% 21.18% 1.06 30.91%
9_85 24.64% 21.55% 1.14 30.70%
10_75 20.95% 21.32% 0.98 30.91%
10_80 21.87% 21.07% 1.04 32.22%
10_85 22.13% 21.14% 1.05 32.17%
18

19. Graphically, Strategy 3 (8-85) could generate better results than other strategies.
19

20. 20

21. 21

22. Factors contribute to
outperformance:
22

23. Key Performance Indicators (During 2010-2014):
Our Long/Short Strategy SP500 Benchmark
Annualized Return Rate 11.24% 18.08%
AnnualizedVolatility 12.84% 16.93%
Max Drawdown 10.69% 18.61%
Annualized Sharpe Ratio 0.90 1.07
Calmar Ratio 1.05 0.97
Beta -1% (Insigificant) 1
Alpha 0.04(10% Sig level) 0
23

24. Key Performance Indicators (Continued):
Our Long/Short Strategy SP500 Benchmark
Corr.With Benchmark -1.4% ----
p.value of Daily Return 0.07 0.03
# of positive return 563/1055 (53.36%) 584/1055 (55.36%)
Avg positive return 0.46% 0.73%
# of negative return 492/1055 (46.64%) 471/1055 (44.64%)
Avg negative return -0.43% -0.74%
24

25. 25

26. Key Risk Indicators (During 2010-2014):
Our Long/Short Strategy SP500 Benchmark
Information Ratio -0.32 ----
Sortino Ratio 1.01 1.43
95%Value at Risk 0.93% 1.65%
95% Expected Shortfall 1.81% 2.50%
26

27. 27

28. Graphically:
During every year, 95%VaR and 95% ES of strategy both are lower than SP500.
95%VaR and 95% ES together perfectly help us to control for extreme and tail loss
28

29. 29

30. 30

31. 31

32. 32
Regression Analysis
Multiple R 0.74023373
R Square 0.547945975
Adjusted R Square 0.510274806
Standard Deviation 0.071638216
Observation 14
Coefficients Std Dev t Stat P-value
Intercept 0.696829984 0.131443124 5.301380257 0.000187918
Survival Rate -0.604769559 0.15857167 -3.813856282 0.002466872
𝑨𝒏𝒏𝒖𝒂𝒍 𝑹𝒆𝒕𝒖𝒓𝒏 = −𝟎. 𝟔𝟎𝟒𝟖 ∗ 𝑺𝒖𝒓𝒗𝒊𝒗𝒂𝒍 𝑹𝒂𝒕𝒆 + 𝟎. 𝟔𝟗𝟔𝟖
𝑊ℎ𝑎𝑡 𝑖𝑓 𝑆𝑢𝑟𝑣𝑖𝑣𝑎𝑙 𝑅𝑎𝑡𝑒 = 100%? 𝐴𝑛𝑛𝑢𝑎𝑙 𝑅𝑒𝑡𝑢𝑟𝑛 = 9.2%

33. 33

34. 34