Saxo Bank (Saxo Bank)
Markets  |  October 22, 2012 15:34:36

How to make 13.3% per year? High Yield ETFs and index EuroStoxx

Investment team Saxo Bank unveiled a model that capitalizes on arbitrations high yield ETF, which is trading lower than their net asset value (NAV). According backtesting since May 2007 this model achieved an annual appreciation of about 13.3%.


The basis of the model is the value Bottomfisher trading and especially its timing. The main idea is based on the purchase of risky assets when the stock exchange traded funds with high yield (High Yield ETFs, HY ETF) are trading below the net value of their assets (Net Asset Value - NAV).

"If you have the opportunity to buy assets cheaper just because they make the purchase through the ETF, it is more or less arbitrary opportunity. The only reason why this option may occur is that shortování mentioned ETF and buying the underlying allocations in high-yield bonds can be complex and too expensive. "Said David Karsbol, team leader of Saxo Bank Strategy, adding that once the ETF high yield traded below the price, it is a clear signal přeprodaného market risk assets. "If the market first of all, they sell these ETFs, it indicates desperation on the market and its extreme effort to obtain cash.In other words - by definition it can be a good time to buy risk assets. "

Trading Signals

According backtesting since May 2007, it was found that shopping shares (index EuroStoxx50) when measured HY ETF market capitalization moved up by 0.6 percent or more below the value of its own assets (NAV), and provide an annual return (excluding dividends and the cost of trading ) of about 13.3 percent. And if the position was held five business days after the last signal (which was the day when the HY ETF traded 0.6 percent cheaper than their NAV).

Backtesting graph (from May 2007)

Source: Bloomberg and Saxo Bank Strategy & Research
Note: Revenues achieved in the past is no guarantee of future performance and that future returns may differ from past ones very significantly and adversely different.

If the business model provides a signal for two days in a row, then the period for holding positions simply extended the day, etc. In other words, the model is always valid for five days from the last signal.

All these HY ETFs are traded in the United States, and the model gives us the signal at the end of the trading day in the U.S., where it is assumed that EuroStoxx50 be purchased and held for five business days. This signal is expected to finish just in time opening of European markets - ie. EuroStoxx50 buy at the start of trading and hold the position for six trading days, then the seventh day to close a position at the beginning of each trading day.

Other features of the model

Model maps the market for less than 15 percent of the time and yet (at least in retrospect comparison) generates attractive yield. In other words, it is an efficient use of capital, which by and large does not correlate with the returns on other markets.

The model in practice

The model is designed to show the bottom in major stock markets. But because EuroStoxx50 index is the most volatile (it has the highest beta value) and the results were the best back-testing using EuroStoxx50, it seems that the required exposure is best achieved inSaxo Bank system through:
First VG [měsíc.rok] (future) or
Second   ETF MSE: xpar. (ETFú

Saxo Bank started this business model live on 1 September 2012. BottomFisher model is one of the 4 models that Saxo Bank live trading with real money on the site

 Globální online investiční banka

Saxo Bank je globální investiční banka specializující se na online obchodování a investice na mezinárodních finančních trzích. Saxo Bank umožňuje soukromým investorům a institucionálním klientům obchodovat s FX, CFD, cennými papíry, futures, opcemi a dalšími deriváty a poskytuje i profesionální správu portfolia a fondů díky svým online obchodním platformám oceněným řadou různých ocenění.

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Jak vydělat 13,3% ročně ? High Yield ETF a index EuroStoxx

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