Equal Weighted Composite - Trading Software

Equal Weighted Composite

allan nathan
2012-02-07 17:53:29

Hi,
I have been working with the equal weighted and checking to see how it works.As far as I know,there is no rebalancing,it is only equal weighted on day 1.On day 1,the index should be 100.
When I change the parameters in update,if I change the "year1" setting and the "Start date" and End Date",when I select Recalculate and Chart,the index on day 1 often no longer equals
100.Sometimes yes,sometimes no.Shouldnt the index always start at 100 on day 1?

Ami I correct that if I want to verify the accuracy of the EW comp calculations,I should be able to take the average of the percent changes in the stocks in the index
from the start to end date,and that should equal the EW comp percent change?

Please let me know if there is anything I am missing..

Thank you,

allan

QuantShare
2012-02-08 05:34:36

Hi,

The composite "Equal Weighted Index" is equally weighted on every bar. Please check the formula.

Example on bar 100:
The composite calculates the performance of each stock (from bar 0 to 100 where bar 0 = base date) and then returns the average.

The base date is specified in the composite formula, update the composite then change the variable "year1".

Equal Weighted Index (by QuantShare, uploaded several months ago)

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allan nathan
2012-02-08 17:36:35

So the EWI is rebalanced daily.I wasnt really aware of that.

What I have been doing is changing the base date,i.e Year1,and then changing the period and time frame.I didnt grasp what was happening with the chart and why it didnt always start at 100 on day 1.

I think I understand it now.
the formula, a=barsince(year()<year1)

appears to be a day offset of the Year1 and the start date for the beginning period.So if the start date <= the first day of January(year1) ,the index will begin at apx 100.If the start is after the Year1 date,the index first value will be relative to the percent difference between year1 and start date.

FYI,when I check the output using a 2 stock portfolio,I do not get an exact equal weight percentage price change when taking the average of the 2 stocks percentage change vs the index change for the same period.Its slightly off...

Thanks for all the help

Allan

QuantShare
2012-02-09 06:00:26

Best Answer

You must find the same percentage change.

The close price is based on the average of the following formula for all stocks included in the composite:

close1 = (close / ref(close, a)) * 100;

ref(close, a) = Close price on the base date

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