No. of Recommendations: 1
"d) don't enter any position on trade day if that particular stock's 5 day share volume (not dollar volume) is less than its 60 day share volume;
Market days, right? Not calendar days? And average N-day volume, right?" Yes market not calendar days.
"e) during the month after purchase, exist any stock no longer meeting "d" criteria i.e. make sure daily," This effect was due to ony a small number of trades and when I looked at ignoring it during the month there was only a tiny effect. Interpretation is that demand faing this much precedes drop or lack of a future up period. I pretended, however that you bought back in if no longer true on trade date. ’ll quantify each ADV-triggered early sale: what happened if sold at the trigger versus held to the normal next rebalance, then summarize win rate and whether a few names explain most of the benefit.
Computed.
For Overlap + volume entry filter + mid-month ADV exit, trade day -1:
Item Result
early-sale events 68
Measurable events 67
Unique stocks sold early 45
Beneficial exits 34
Harmful exits 33
Beneficial rate 50.7%
Median stock return after exit to next rebalance -0.03%
Average stock return after exit to next rebalance +0.99%
So the rule is not consistently predictive. It is basically a coin flip by count.
The portfolio improvement came from a few large helpful exits offsetting many small or harmful exits. Top positive contributors:
Stock Approx portfolio benefit
TSLA +10.8%
VRTX +8.3%
SHLDQ +6.5%
PTON +5.7%
ISRG +5.4%
Top 5 helpful stocks explained about 62.6% of all positive exit benefit.
Marginal effect of adding the mid-month exit on top of entry filter:
Metric Change
CAGR +0.26 pts
Sharpe +0.015
Beta -0.022
UI -0.87
MDD +1.26 pts better
MDD recovery 18 days faster
Longest ≥10% recovery 140 days worse
My read: the entry filter is cleaner than the mid-month exit
My read: the entry filter is cleaner than the mid-month exit. The mid-month exit helps some headline metrics slightly, but its edge is not broad; it depends on a small number of exits.
More <-10% drops but massively more up gain between them and faster recovery (see above).
A matter of preference on what is most important to you. For me in last 28 years recovery times has mattered more: if I get 3X market I am wiling to have drops as long as I recover faster. Sharpe, Beta, and UI all better.
