THE CHOW RATIO & OUR SHORT TERM REVERSAL STRATEGY


Utilizing the Chow Ratio to capitalize on the equity markets short term reversal effect Vesper has contracted with Standard & Poor’s Dow Jones Indices to create the UTRNX index. This strategy was designed to achieve superior investment results while incurring less volatility than the S&P 500.

UTRNX PHILOSOPHY, PROCESS & PORTFOLIO

PHILOSOPHY


Vesper’s philosophy capitalizes on one of the stock market’s most powerful anomalies; short-term reversal.
85% of daily large-cap stock trading volume is non-fundamental (i.e., program trading). As a result, markets and stocks are often overbought and oversold.
Profiting from this behavioral-driven volatility, our UTRNX index seeks to outperform the S&P 500 over the market cycles.
The 25-year back-test serves as an example of the opportunity inherent in short-term reversal.

THE CHOW RATIO


Decades of research have shown that strategies capitalizing on the short-term reversal effect (while controlling trading costs) can add value and reduce volatility relative to the major market indices.

The Chow Ratio (CR) is a performance index that serves for security selection and portfolio optimization. The statistical formation of the CR is similar to that of the Sharpe Ratio but with a different risk-measure.

The conventional measure of price movement volatility, standard deviation, assumes investors treat their winning stocks the same way they treat their losing stocks (i.e. volatility is symmetric).

However, in many instances, the fear of loss causes investors to sell their downward-trending stocks much sooner than their upward-trending stocks. This overreaction results in significantly more downside price movement than upside price movement causing actual volatility to be asymmetric. Therefore, the CR incorporates an asymmetric measure to more effectively select securities.

PROCESS


The eligible universe of stocks to select from are all S&P 500 companies.
The Chow Ratio is calculated for each company in the S&P 500 Index.
The 25 stocks with the lowest Chow Ratio value (i.e. the stocks with the best chance to experience short-term reversal) are selected for inclusion in the UTRNX Index.
The Index is evaluated and re-balanced on a weekly basis.
A stock in the Index is only removed at re-balance, if its Chow Ratio value has risen out of the bottom 50 stocks of the S&P 500 and replaced with the next lowest valued stock.

PORTFOLIO


The Vesper US Large Cap Short-Term Reversal Index is an equally-weighted index consisting of twenty-five stocks selected from the S&P 500 that will most likely benefit from the short-term reversal effect, which includes gross re-invested dividends.

Top 10 Holdings (as of 12/31/2019)
Company Name Weight
Apache Corp. (APA) 4.06%
Marathon Oil Corp. (MRO) 4.05%
National Oilwell Varco (NOV) 4.04%
Micron Technology Inc. (MU) 4.03%
Microchip Technology Inc. (MCHP) 4.02%
PerkinElmer Inc. (PKI) 4.02%
Newmont Corp. (NEM) 4.02%
Twitter Inc. (TWTR) 4.01%
DXC Technology Co. (DXC) 4.00%
Nordstrom Inc. (JWN) 4.00%
Sector Breakdown (as of 12/31/2019)
Sectors Weight
Finance 28.42%
Energy Materials 20.14%
Health Technology 11.81%
Transportation 11.73%
Electronic Technology 7.99%
Commercial Services 7.86%
Consumer Durables 4.10%
Industrial Services 4.01%
IProcess Industries 3.81%

VESPER SHORT-TERM REVERSAL INDEX (UTRNX)


Historical Performance History
Growth of 10,000: June 1992 to Dec. 2019

UTRNX is the ticker symbol of Vesper US Large Cap Short term Reversal Index.

The performance data quoted from 6/1992 through 7/2018 is backtested using the rules-based Chow Ratio. The UTRNX Index went live starting 8/2018. These returns do not include management fees and trading costs. Current performance may be higher or lower than the performance quoted. Returns for periods greater than one year are annualized. Past performance is no guarantee of future results.

ADDITIONAL UTRNX INFORMATION


UTRNX Fact Sheet
Presentation Book
Utilizing UTRNX as a Satellite Investment
Utilizing UTRNX in Combination with Momentum
Dot Com Bubble Performance
Pandemic Performance
2008 Recession Performance
Rolling Performance 3 & 5 Year
Performance Relative to Volatility
Annualized Performance & Key Ratios
UTRNX as a Liquid Alternative

CONTACT US



Darrin M. Hoffman, CFP®
215-740-3030
DHoffman@VesperGlobal.com

Hours
Monday - Friday: 9am - 5pm
Saturday - Sunday: By appointment

DISCLAIMERS


Index returns shown prior to July 30, 2018 reflect back-tested performance, which is NOT actual performance, but is hypothetical. No entity achieved the back-tested performance shown. The back-tested return calculations are based on the same methodology that was in effect when the index was officially launched. However, back-tested returns reflect the application of the index methodology with the benefit of hindsight, and the index was developed with the benefit of knowing what such back-tested returns would show. The results of such back-tested returns were used to further the development of the index to maximize the back-tested returns for the index. In addition, back-tested performance reflects material market events that are not expected to be repeated.

Index returns shown may not represent the results of the actual trading of investable assets because the index returns do not reflect the fees and expenses that would have been incurred in such trading. Additionally, the back-tested index returns assume that the index was fully invested (i.e., no cash was included). You cannot invest in an index.

Actual results may significantly differ from the back-tested returns being presented, and back-tested performance is not an indication of future results. This information is provided for illustrative purposes only.