Hello all,
I have received various thoughts on ATC and spikes(pad and
align,reload data),but IMHO i think their may be an inherent flaw in
the calculation of indicies..There is also a very good chance i am
losing it...
Here is my real issue regarding ATC...After running the simple ATC
code,i found a tremendous number of data spikes.It appears to be
occuring when a stock with a shorter data history is in the
composite.If I am not mistaken,ATC sums up the indivisual stocks and
creates a price weighted index.So,if we have a an index of four
stocks,A,B and C having one year of history,and stock D having 6
months,if stock D's initial price differs substantially from the
composite of A,B,C,there will be a large spike.I verified it.As an
example..On day 180,A+B+C=50.On day 181,if stock D is introduced and
it is trading at 50,A+B+C+D =100 and the index will have increased
100%.Of course if you include the count divisor,this affect will be
mitigated,but none the less,it is not the proper way to handle an
index.IMHO, an equal weighted composite with the change in percent
returns may be the solution
Ami I nuts,or just losing my mind???
Allan
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