Starting Friday evening, most of the predefined universes will be driven by custom universes which will appear in the Predefined Universes category under P123 Universes on the Universes page. Once available, the rules that define these universes can be referenced by accessing the custom universes. (Don’t try to recreate the Cap or Prussell universes on your own because you will be missing the periodic reconstitution.) These changes are being made in preparation for coverage of European stocks.
While only minor differences will be seen in the constituents of most of these universes historically, the Micro Cap, Small Cap, Mid Cap, and Large Cap universes have been rearchitected. The current implementation of these universes was based on an algorithm that was giving inconsistent results. Any systems that are using these four Cap universes will see some differences since the market cap ranges have been adjusted to more closely replicate the market cap ranges defined on the Holdings - Allocation page in Research. We will also be adding a new Nano Cap universe.
The OTC and ADR universes are going to be based on All Stocks - USA rather than on All Fundamentals - USA and, conversely, the No OTC universe will be based on All Fundamentals -USA rather than All Stocks - USA.
All Stocks - Canada is being added, but CanadaTrust, Toronto Stock Exchange, and TSX Venture Exchange will instead be based on All Fundamentals - Canada.
Please let me know if you have any questions about any of this.
The rules for all the universes, including the Large Cap universe, can now be found by going to Research / Universes, then clicking on P123 Universes. So, for example, the rules for the Large Cap universe are here: https://www.portfolio123.com/app/universe/summary/265603?st=1&mt=7.
Please note that even though you can copy one of the predefined custom universe, like Large Cap, you will not get the same results if you use it in backtest. The predefined universes have their own reconstitution dates independent of your backtest.
Having the ability to specify a separate reconstitution date for your custom universe in a backtest is a feature we are considering. If you want this feature please add your support with a vote in our roadmap . There’s a card called “Allow the custom universe to have a different reconstitution than the backtest”
Yuval - I haven’t seen a definition of the “All Stocks” and “All Fundamentals” Universes in many years. My firm focuses exclusively on ETFs, but I do use broad stock universes in many of the Custom Series I create.
I think it would be helpful to everyone if P123 could provide an updated and accurate definition of the current differences between these two Universes.
What are the practical implications of these changes? What’s the reason this was done?
All Fundamentals is a subset of All Stocks and comprises all companies for which we get fundamental data.
The practical implication of the changes seems self-explanatory. You used to find some stocks without fundamental data in the No OTC universe. Now you won’t. Conversely, you’ll find some ADRs and OTC stocks without fundamental data if you use those universes.
As I wrote, we had to rejigger the universes in preparation for rolling out European data. We took the opportunity to improve a number of them. To me, and to the rest of the staff here, all these changes are definitely improvements.