ETF Wanderer_'s Comments

Graphing Performance of Put-Write and Buy-Write

Wed, 14 Jan 2009 14:47:11 -0500

I too found the difference a bit strange. Perhaps the CBOE should come out with a paper explaining them.

The mathematical obvious reason is that the volatility of the put prices are different from the call prices (assuming the two are liquid enough that their bid-ask prices are similar).

Why I Bought Financials (Despite the Mess)

Mon, 06 Oct 2008 10:13:09 -0400

Hmmm... Mr. Feirman, UYG on July 14th for 15.65 (say at the Close) and 15.95 on Oct 3rd, 14.62 on Oct 4th today --- so you are pretty much at the same levels. I would have thought that you have been blown away by now!

Financials can be indeed a very tricky sector.

WisdomTree’s New Bundle of Joy: An Active Currency ETF

Fri, 12 Sep 2008 20:30:01 -0400

I guess, a bit late and bad timing. dollar has already broken long term descending trend lines. Some of the currencies on the list have already started to fall substantially against the dollar.

A Home Grown Emerging Market Volatility Index

Fri, 12 Sep 2008 20:28:03 -0400

Great work. I hope some from CBOE is reading this post. They just keep on creating multiple US Vol indices which are anyway highly correlated. Some emerging market Vol index products can really provide some differentiation.

New Currency ETN from Barclays

Thu, 04 Sep 2008 19:57:35 -0400

Interest on Indian rupee for a 1 yr deposit has crossed 10%, but at the same time, the currency fell around 10% in just the last few months.

I think the market is in an inflection point these days. Could be dangerous to invest in currencies with high interest rates at present. Methinks better to wait and watch.

Freddie and Fannie: Living in the Past

Fri, 22 Aug 2008 14:31:13 -0400

what most people have missed out in all the FRE and FNM debates is that the govt of China is one of the largest losers.

Fannie and Freddie Shareholders Run for the Exit

Thu, 21 Aug 2008 10:42:04 -0400

usually magazines like Barron are contrary indicators. but, the news is really dire on FNM and FRE. for all you know it might resemble enron, rather than corning or nextel etc.

Asset Class Movements: So Much for the Summer Doldrums

Mon, 18 Aug 2008 11:12:04 -0400

ECRI is as junk as it can get.

The New Oil Volatility Index: Falling Along With Crude Prices

Wed, 13 Aug 2008 10:14:50 -0400

Recent academic works seems to suggest that the negative correlation (of VIX with SPX) is due to non-normality behavior, in particular, the ability of asset prices to jump. For instance, here is a list of two papers from Journal of Finance:

(1) Eraker, Bjorn., 2004, Do Stock Prices and Volatility Jump? Reconciling Evidence from Spot and Option Prices, Journal of Finance 59, 1367-1403.

(2) Eraker, B., M. J. Johannes, and N. G. Polson, 2003, The Impact of Jumps in Returns and Volatility, Journal of Finance 53, 1269-1300.

Personally, I kind of view these papers as academic junk. Nevertheless, it is interested to see whether similar negative correlation will exist in commodities.

Too early to tell perhaps. Thanks for the interesting observation.

The Pendulum Will Swing Back to Value Stocks

Tue, 12 Aug 2008 10:00:48 -0400

i have been tracking the value-growth spread as a part of my regular work. this month should have been really good for value out-performance, with the bounce back in financials etc.

however, if you take a look at the charts of the value-growth spreads (e.g. avg earnings yield of top decile minus bottom decile), they have broken long term trend lines and appear quite negative to say.

any correction or reversal in value-growth characteristics of any stock can happen by either the price or the value measure. for instance, suppose we use earnings/price as a measure, then a stock can change from value to growth by either change in the earnings or change in the price term - and a change in the price is what is commonly called as "value trap" - more specially a lot of companies which are value companies only because their declared earnings haven't kept inline with their prices. the level of companies in possible "value trap"s are also quite extremely high at present (i am assuming that you are well versed with all these).

i agree value should outperform growth in the long run, but currently the level of value traps and the break in the trends indicate otherwise and the bounce-back in financials is good, but we will have to wait and see if it is not a dead-cat bounce (as someone else on this blog has put it).

You Mean Whirling Ben Graham?

Mon, 11 Aug 2008 10:18:49 -0400

The big question about these new indices is that what is so "Intelligent Value" about them; since as it is we already have value based ETFs, it is unlikely that these ETNs will gain much volume (unless the issuer is betting on investors to shift from ETFs to ETNs).

One Hundred 1% Days

Thu, 31 Jul 2008 17:04:23 -0400

yeah. same here. is there any relation between the measure and the index? else, if there is none, then whats the point of this article?

Double Longs: An Equity Idea in a 6% World?

Thu, 31 Jul 2008 10:00:57 -0400

roger,

you mentioned that the double long products essentially hold two futures plus t-bills. what about products where the futures are illiquid or do not exist? for instance, UYG is double long financial stocks, but I am not sure if any future exist on financial stocks. how is the product contructed in this case?

thanks

Call-Writing Closed-end Funds: Hard To Judge Future Risk/Return (BEP, FFA, IGD, JPZ, JSN, MCN, NFJ)

Sat, 26 Jul 2008 13:02:46 -0400

nice article. at some point in the future, can you do a followup on your article? also, include the historic total return and expense ratios.

thanks.

Why I Bought Financials (Despite the Mess)

Tue, 15 Jul 2008 11:56:44 -0400

fortunately, for us, we will be able to appreciate and see how your story ended. I will be bookmarking this page.

everybody knows that financials will go up someday, but not before some serious damage. question is now or after a month or after a year. you have picked the "now" trade.

Friday Outlook: Commodities, Emerging Markets

Mon, 23 Jun 2008 10:39:26 -0400

nice charts.

p.s. someone not knowing Chucky is definitely out-of-touch - but "stick save"?? a huge number of people on the wall street (from europe/asia etc like myself) are unlikely to know the term. perhaps "stick save" isn't so common on the east coast. i asked a few US citizens on my floor - and none knew it either and then I had to google.

How Does India's Energy Consumption Compare to China's?

Wed, 18 Jun 2008 13:36:30 -0400

good article. fresh perspective. i always search this site for fresh research areas and for a long time didn't come across anything exciting. but some of the metrics you have used here are innovative.

Exchange-Traded Funds and Closed-End Funds by Asset Class, Type and Provider

Tue, 13 May 2008 12:23:42 -0400

can you please update this list? thanks.

Inverse Oil ETF Plunges 26%: What Gives?

Thu, 10 Apr 2008 10:03:33 -0400

good article ... thanks for bring it to the attention. always found the UCR and DCR combination to be the wierdest and erroneous ETFs. good that I stayed away.

Money Magazine ETF Recommendations: Keeping It Simple May Be Stupid

Thu, 10 Apr 2008 09:58:29 -0400

But SPY, IWN, VEU and DLS do march in lock-step (high correlation & even higher downside correlation) - so thats basically a 60% exposure to equities.

Chinese, Indian Currency ETNs Launch

Thu, 20 Mar 2008 11:35:39 -0400

well, the rupee floats freely although their central bank keeps intervening infrequently. i doubt these are based on futures market, since the only rupee futures market is in dubai which is outside india and illiquid; while the yuan does not have a futures market. most likely they would be tied to forwards or swap rates (not futures), which is probably also why the interest accrual will be in US fed fund rates.

The Case for Indexing - More Evidence

Mon, 15 Oct 2007 15:31:09 -0400

Hi, Can you make an index out of the four funds: James Market Neutral, JAMNX; Hussman Strategic Growth, HSGFX; Analytic Investors Global Long-Short, ANGLX; J.P. Morgan Market Neutral, OGNAX and show how the index has performed. Alternatively, it will be great if you can provide this "Listed Market Neutral Fund Index" on Bloomberg & Reuters - it will be a great way for people to track these funds.

Thanks.

A VIX-Replicating ETF Would Be Problematic and Expensive

Wed, 12 Sep 2007 10:36:25 -0400

Michael,

Quite interesting reply.

Regd your statement: "community's less-than-pleasant response to the predictable contango issues earlier in the year":

Can you give some more details on what was the "predictable contago issues" and what was the "community's less-than-pleasant response"? Also what is the "community" that you mention?

Will Quant Strategy ETFs Suffer From Returns Decay?

Tue, 11 Sep 2007 11:17:04 -0400

One of the reason is that most of the commonly used factors in quant models haven't done so well in the recent 2-3 years including two of the most commonly & heavily used factors: value and momentum. Hence, the lack of performance.

A VIX-Replicating ETF Would Be Problematic and Expensive

Tue, 11 Sep 2007 11:13:41 -0400

Interesting article, but a very important "quant" reason is left out - the additivity of variances rather than volatility.

Variance swaps are more popular than volatility products because of the simple reason that they are linear. For example, lets say there are two products with zero correlation; then:
Var(a+b) = Var(a) + Var(b)

but Vol(a+b) < Vol(a)+Vol(b)

The linear nature of variances can help in a lot of trading strategies - e.g. in spreading the index variances with a "weighted" sum of stock variances (essentially an average correlation play).

Volatility - although conceptually just a square root - is non-linear and cannot represented as a "weighted" sum of stock volatility. Similarly, to arb an index vol with stock vol, once has to do a lot of delta-trades for the non-linear parts which is either a pain or transactionally not efficient any more.

I Believe in ETFs. Do You?

Fri, 08 Jun 2007 10:05:09 -0400

-- "And even the big "smart" money has poured into 10,000 hedge funds charging 2 and 20"

Notwithstanding the fact that many hedge funds are disguissed beta bets, there are many others that more pure alpha bets. So, investing in carefully selected portfolio of ETFs+hedge funds is not a bad idea.

Market Concern: Hedge Funds, Bonds and ETFs

Mon, 02 Apr 2007 15:02:34 -0400

I think a levered 2x or 3x or even 4x Bond ETF might attract a lot of retail investors who want fixed income exposure but either don't want margin accounts with high interest rates for returns less than the interest rates or who don't have access to the swap markets.

Nine ETFs I'd Like To See

Thu, 29 Mar 2007 11:33:28 -0400

Levered versions of Bond ETFs on AGG, TLT etc + which also pay very little dividend (& reinvest the dividends for total returns etc).

In Search of Low (or Negative) Correlation Between Asset Returns

Wed, 07 Mar 2007 09:56:15 -0500

Quick question: how do you define "Trends" which you used in correlation between trends - is it YoY return or something similar ?

Emerging Markets ETFs: Predictable and Consistent

Thu, 01 Mar 2007 22:35:28 -0500

Sorry about that. Just that the article seemed a bit too unintelligent. It is not an article worth putting in the same league as the Seekingalpha articles such by other etf writers such as those by Roger, Tom Lyndon, Megane etc.