P/E pipeline filter implementation

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posted Feb 14, 2018

Good evening,
I just implemented a filter in my pipeline so that when I filter my universe of stocks in my pipeline, it picks only those with the highest P/E ratio. The idea was that if the P/E ratio is high the stock might be more of a temporary "fad" and by consequence more exposed to the strategy written here in this paper: http://www.sciencedirect.com/science/article/pii/S1059056016301563

Unfortunately the result is not super exciting since the Sharpe ratio is pretty low; moreover, while the algo performs really well in the crisis, it seems do stop/decrease in growth during the recovery and I don't really understand why since the beta is always close to zero. Is there any mistake that I might be doing? Do you have any suggestion on how to improve my code? Or on other fundamentals/indicators that I could consider?
Thanks a lot in advance,
Mattia

6 responses

Mattia Vicari

Feb 15, 2018

Here I tried to add a liquidity filter to my pipeline instead and it seems to work better than in my previous algo since the Sharpe ratio is way better.

Mattia Vicari

Feb 16, 2018

Here I tried improved my overall returns by filtering my stocks only from the technology sector.

Mattia Vicari

Feb 26, 2018

Results with only short positions:

Mattia Vicari

Feb 26, 2018

Results with only long positions

Mattia Vicari

Feb 26, 2018

Increased leverage from 0.3 long/short to 0.75 long/short, increased sector coverage from technology to "technology, industrials, utilities, energy, health care, financials"

Mattia Vicari

Mar 5, 2018

Debugged code, the "market_close_trades" function was not trading.

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