Hi,
I’m trying to create a screen showing how stocks perform by P/B, P/E, P/S by quintile. I’m using Price to Book (P/B) for my example using the following criteria:
Main Settings:
Universe: S&P 500 Index
Benchmark: S&P 500 Eq Weight
Rules:
Frank(“Pr2BookQ”,#All,#ASC)>X
Frank(“Pr2BookQ”,#All,#ASC)<Y
Where X and Y are the thresholds:
Lowest 20%: X=80 Y=(blank out formula)
20-40%: X=60, Y=80
40-60%: X=40, Y=60
60-80%: X=20, Y=40
Highest 80%: X=(blank out formula) Y=20
Rolling Backtest:
Frequency: Every 4 Weeks (about 208 samples)
Holding Period: 1 Year
Time: 1/1/2000 - 11/14/2015
The idea is that the lowest P/B stocks perform better than the highest P/B stocks, but when I take the average it doesn’t equal the S&P 500 Eq Weight index
Quintile Annual Performance:
Lowest 20%: 14.38%
20-40%: 13.45%
40-60%: 11.67%
60-80%: 9.21%
Highest 80%: 9.08%
Average Performance: 11.56%
Benchmark: 9.34%
Could you tell me why my average performance is 2.22% higher than the equal weight benchmark? Does the S&P 500 Eq Weight Benchmark not include Dividends but the others do?