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BACK-TESTS (A WORK-IN-PROGRESS)

BACK-TESTS (A WORK-IN-PROGRESS). By Rawley Thomas President LifeCycle Returns, Inc. Rawley@LCRT.com. SAMPLE & METHODOGY. About 8,500 Industrial and Manufacturing Companies 1994-2001 Panel Data Raw Data Source: Simplystocks Calculations: LifeCycle Returns, Inc.

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BACK-TESTS (A WORK-IN-PROGRESS)

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  1. BACK-TESTS(A WORK-IN-PROGRESS) By Rawley Thomas President LifeCycle Returns, Inc. Rawley@LCRT.com

  2. SAMPLE & METHODOGY • About 8,500 Industrial and Manufacturing Companies • 1994-2001 Panel Data • Raw Data Source: Simplystocks • Calculations: LifeCycle Returns, Inc. • Tests Run on Fiscal Year +3 to +15 Months Capital Gain or Appreciation • Distribution Divided into Winners and Losers Based on Screen Splitting Distribution in Half

  3. SCREENS • Jagedeesh-Titman Price Momentum – Fiscal Year -9 to +3 Months • Cash Economic Return Momentum – Fiscal Year -9 to +3 Months • Over/Under LCRT Life Cycle Intrinsic Value at Fiscal Year +3 Months

  4. TOTAL DISTRIBUTION

  5. JEGADEESH-TITMAN* PRICE MOMENTUM EFFECT *Narasimhan Jegadeesh and Sheridan Titman, “Profitability of Momentum Strategies: An Evaluation of Alternative Explanations,” Journal of Finance, April, 2001, pp. 699 ff.

  6. CASH ECONOMIC RETURN MOMENTUM

  7. OVER/UNDER LCRT LIFE CYCLE INTRINSIC VALUE AT FISCAL YEAR +3 MONTHS

  8. OVER/UNDER LCRT LIFE CYCLE INTRINSIC VALUE AT FISCAL YEAR +3 MONTHS – TOP AND BOTTOM DECILES

  9. OVER/UNDER LCRT LIFE CYCLE INTRINSIC VALUE AT FISCAL YEAR +3 MONTHS – MODEL TRACKING ERROR < 30%

  10. FULL DISTRIBUTIONS

  11. OVER/UNDER LCRT LIFE CYCLE INTRINSIC VALUE AT FISCAL YEAR +3 MONTHS – MARKET CAPITALIZATION > $1 BILLION

  12. OVER/UNDER LCRT LIFE CYCLE INTRINSIC VALUE AT FISCAL YEAR +3 MONTHS – MARKET CAPITALIZATION > $1 BILLION AND MODEL TRACKING ERROR < 60%

  13. COMBINING PRICE MOMENTUM AND OVER/UNDER INTRINSIC VALUATION

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