Post of the Day
February 26, 1998

From our
Dow Dividend Board


Subject:
TBD Holding Periods & Start Qtr Details
Author: MontanaFool

Thanks to the diligence (not to say stubborness) of TimberFool we now have the most accurate set of raw quarter DJIA data I can envision. It's hard to realize the amount of work he accomplished to root out every little error, contradiction and confusion.

Timberfool is working to transform his data into a commercial product in user friendly format for those who wish to roll their own model results. Meanwhile, here is a detailed summary of what his data produced for me for various common Dow strategies. Results are listed for holding periods of from 1 Quarter up to 8 Quarters. All 4 possible starting quarters are listed as well as the combined results of all quarters taken together. Each value represents the expected return for the given condition. No "what if" testing has been done yet.

All these numbers are Annualized Compound Annual Growth Rate expressed as decimal multipliers, which is the format needed for most further statistical manipulation. So a gain of 12% is listed as 1.1200 and a loss of 15% would be shown as 0.8500. Sharp eyed Fools will note several small differences between this data and similar numbers posted by Timberfool. These differences might be caused by several factors: blunders on my part, slightly different years included, a few interpretation differences of some arcane issues, etc. In the many instances where Timberfool and I have compared independently created model results for the same conditions we have agreed to 6 decimal places. So you can be assured the major patterns will not change if/when we iron out our minor differences.

In interpreting the results I am perhaps a little more optimistic than TimberFool. In general, your expected Annualized CAGR has a broad, flat peak from 4 quarter holding to 7 quarter holding. Expected gain falls off on either side. Quarter 1 is by far the best starting period with Quarter 4, Quarter 2 and Quarter 3 being in general progressively worst starting times no matter how long the model is held.

But I take comfort in the fact the models, especially the better ones, still return higher than the Dow30 in all cases. It is just a matter of perspecitve. Only a few years ago I was convinced by Graham's work any attempt by an individual investor to earn over 7% was being wildly speculative. So complaining if a model earns "only" 15% half the time and 20% the other half might be a case of unreasonable expectations. Where else can you invest your money with so little effort and still have such strong odds of long term market busting performance.

Several follow on studies are in the mill so please be patient about other models, portfolio return simulations etc. Note my favorite UV2 and UV5/6+ have the most consistent behavior between quarters. For those who wish to do their own analysis here are the details:

   
Summary TBD Model Results      1965-1995     02/20/98
 
 
UV21965 -1995
 
CAGR Hold 1 2 Qtr 3 Qtr 4 Qtr 5 Qtr 6 Qtr 7 Qtr 8 Qtr
All 4Q 1.1663 1.1638 1.1638 1.1730 1.1706 1.1731 1.1715 1.1620
Q1 Bgn 1.3385 1.2900 1.2142 1.2041 1.2091 1.1960 1.1766 1.1663
Q2 " 1.1648 1.0967 1.0951 1.1556 1.1526 1.1507 1.1548 1.1517
Q3 " 1.0363 1.0705 1.1435 1.1538 1.1419 1.1526 1.1611 1.1523
Q4 " 1.1453 1.2113 1.2063 1.1790 1.1799 1.1939 1.1940 1.1780
 
UV41965 -1995
 
CAGR Hold 1 2 Qtr 3 Qtr 4 Qtr 5 Qtr 6 Qtr 7 Qtr 8 Qtr
All 4Q 1.1450 1.1445 1.1415 1.1456 1.1507 1.1524 1.1546 1.1508
Q1 Bgn 1.2936 1.2380 1.1860 1.1810 1.1958 1.1873 1.1726 1.1660
Q2 " 1.1510 1.1055 1.0903 1.1301 1.1434 1.1329 1.1428 1.1502
Q3 " 1.0444 1.0605 1.1206 1.1266 1.1121 1.1203 1.1355 1.1330
Q4 " 1.1055 1.1821 1.1717 1.1455 1.1530 1.1704 1.1681 1.1541
 
UV4+1965 -1995
 
CAGR Hold 1 2 Qtr 3 Qtr 4 Qtr 5 Qtr 6 Qtr 7 Qtr 8 Qtr
All 4Q 1.1535 1.1519 1.1501 1.1559 1.1586 1.1605 1.1615 1.1556
Q1 Bgn 1.3099 1.2561 1.1965 1.1900 1.2017 1.1914 1.1749 1.1672
Q2 " 1.1568 1.1039 1.0933 1.1403 1.1481 1.1405 1.1486 1.1522
Q3 " 1.0435 1.0648 1.1295 1.1366 1.1230 1.1321 1.1449 1.1403
Q4 " 1.1194 1.1925 1.1840 1.1575 1.1629 1.1791 1.1779 1.1631
 
UV5/6+1965 -1995
 
CAGR Hold 1 2 Qtr 3 Qtr 4 Qtr 5 Qtr 6 Qtr 7 Qtr 8 Qtr
All 4Q 1.1562 1.1493 1.1479 1.1559 1.1593 1.1612 1.1611 1.1557
Q1 Bgn 1.3004 1.2321 1.1756 1.1751 1.1921 1.1841 1.1708 1.1616
Q2 " 1.1380 1.0994 1.0939 1.1464 1.1512 1.1452 1.1450 1.1514
Q3 " 1.0850 1.0904 1.1492 1.1501 1.1394 1.1413 1.1546 1.1501
Q4 " 1.1129 1.1811 1.1747 1.1523 1.1553 1.1745 1.1745 1.1599
 
OldFool41965 -1995
 
CAGR Hold 1 2 Qtr 3 Qtr 4 Qtr 5 Qtr 6 Qtr 7 Qtr 8 Qtr
All 4Q 1.1296 1.1279 1.1350 1.1453 1.1547 1.1587 1.1586 1.1533
Q1 Bgn 1.2632 1.2088 1.1770 1.1808 1.2024 1.1893 1.1764 1.1662
Q2 " 1.1137 1.0827 1.0863 1.1422 1.1475 1.1458 1.1452 1.1561
Q3 " 1.0836 1.0719 1.1321 1.1268 1.1229 1.1288 1.1484 1.1428
Q4 " 1.0681 1.1535 1.1462 1.1320 1.1474 1.1717 1.1647 1.1482
 
DD51965 -1995
 
CAGR Hold 1 2 Qtr 3 Qtr 4 Qtr 5 Qtr 6 Qtr 7 Qtr 8 Qtr
All 4Q 1.1505 1.1444 1.1440 1.1474 1.1534 1.1554 1.1548 1.1509
Q1 Bgn 1.2789 1.2110 1.1621 1.1567 1.1811 1.1775 1.1635 1.1536
Q2 " 1.1365 1.1126 1.0998 1.1479 1.1504 1.1411 1.1391 1.1490
Q3 " 1.0838 1.0800 1.1461 1.1405 1.1283 1.1301 1.1459 1.1446
Q4 " 1.1121 1.1786 1.1693 1.1448 1.1544 1.1738 1.1710 1.1565
 
DD101965 -1995
 
CAGR Hold 1 2 Qtr 3 Qtr 4 Qtr 5 Qtr 6 Qtr 7 Qtr 8 Qtr
All 4Q 1.1391 1.1290 1.1311 1.1359 1.1388 1.1384 1.1395 1.1391
Q1 Bgn 1.2504 1.1867 1.1510 1.1430 1.1612 1.1547 1.1444 1.1400
Q2 " 1.1132 1.0923 1.0919 1.1327 1.1353 1.1280 1.1280 1.1389
Q3 " 1.0973 1.0827 1.1322 1.1336 1.1242 1.1215 1.1355 1.1350
Q4 " 1.1025 1.1576 1.1501 1.1343 1.1349 1.1499 1.1504 1.1424
 
DOW301965 -1995
 
CAGR Hold 1 2 Qtr 3 Qtr 4 Qtr 5 Qtr 6 Qtr 7 Qtr 8 Qtr
All 4Q 1.1108 1.1103 1.1112 1.1113 1.1114 1.1108 1.1116 1.1130
Q1 Bgn 1.1882 1.1391 1.1092 1.1136 1.1288 1.1192 1.1079 1.1100
Q2 " 1.0920 1.0711 1.0870 1.1125 1.1072 1.0968 1.1009 1.1111
Q3 " 1.0488 1.0781 1.1152 1.1076 1.0952 1.1002 1.1119 1.1128
Q4 " 1.1187 1.1555 1.1339 1.1113 1.1147 1.1271 1.1259 1.1181

Fooling in the Flathead,

Tom Kuffel, kuffel@cyberport.net


Go To Dow Dividend Board

The Post of the Day may be edited for readability or length, but never for content. The opinions expressed in the Posts are those of their authors, and not necessarily The Motley Fool. We make no claim or warranty as to the veracity or accuracy of any post, and present this feature only as an example of what may be found on our message boards. Don't take the Post of the Day, or anything else here, as gospel and, as our seventh grade English teacher, Mrs. Peacock, used to say, do your own homework, and avoid run-on sentences.