Hi All
I just ran a previously shared algorithm that ranks stocks based on earnings yield and creates a Long-Short portfolio. I modified the algorithm to only include the stock leg and weights stocks by respective market capitalization.
However, I observe that the leverage doesn't stay at 0.5 (intended) and shoots to 1.1 in certain cases(around GFC). Attached is the backtest that details the algorithm. If someone has any idea about the leverage breakdown, please share the insights.
Shiv
The problem could be that there are lot of corporate events around the crash so the universe gets out of whack. That time period tends to mess with algos that have a dynamic universe.
Your leverage can creep up as delisted companies remain in the portfolio. Here is a workaround (see Seong's reply) while we work to provide a more robust mechanism.
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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.
In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.
