Fearful of a Japanified stock market?

[ochotona]

Here is the result of applying 1-year look-back absolute momentum (a form of trend following) to the T. Rowe Price Japan Fund, PRJPX, for 1993-Present.



Note, without trend-following the CAGR result is 3.37% - exactly the kind of low result we fear over the next decade in the USA. With trend-following? 8.07%. For reference, over the same period the CAGR for HBPP was 6.81% and Sortino was 1.15. Throw some bonds, cash, and gold in with the trend-followed PRHPX, and it's a very tolerable situation.

My out of market asset? Plain old cash, not bonds.

[eufo]

It's a worry, for sure. Rebalancing strategies should increase CAGR by quite a bit, but I'm intrigued enough to inquire about the momentum strategy being applied here. Can you link to more information?

EDIT: Nevermind. I thought it looked like the Portfolio Visualizer site, so I searched around a bit and found the Market Timing area there. I never bothered to look at it before. Very interesting.

[ochotona]

portfoliovisualizer.com, more fun than Maxim magazine

[D1984]

Here is the result of applying 1-year look-back absolute momentum (a form of trend following) to the T. Rowe Price Japan Fund, PRJPX, for 1993-Present.



Note, without trend-following the CAGR result is 3.37% - exactly the kind of low result we fear over the next decade in the USA. With trend-following? 8.07%. For reference, over the same period the CAGR for HBPP was 6.81% and Sortino was 1.15. Throw some bonds, cash, and gold in with the trend-followed PRHPX, and it's a very tolerable situation.

My out of market asset? Plain old cash, not bonds.

Ochotona,

Two quick questions:

One, can you do this on just the Nikkei 225? The T. Rowe Price Japan fund is priced in USD so the actual decline for a Japanese investor living in Japan would've been even worse off from 1990 to late 2012 (IIRC at least 25-30% worse) since his investments were priced in Yen and since Yen generally rose against the USD during this period. Also; the T. Rowe Price fund was not 100% invested in Japanese stocks during at least some of this period, as per http://www.nytimes.com/1992/09/13/busin ... -only.html ( "George A. Murnaghan, vice president of Rowe Price Fleming International, which manages the $50 million T. Rowe Price Japan Fund, which was started last December, says the fund holds 17 percent of its assets in cash" ).


Two, given that the above chart starts in 1993 it misses the worst years of the decline. 1990, 1991, and 1992 were horrible years for Japanese stocks; see http://www.1stock1.com/1stock1_781.htm . The real return for those three years (assuming no using any form of market timing or trend following) on Japanese equities was even worse than US stocks earned from 1973-74 or 2007 to early 2009. Hmmm..actually, the chart says Jan 1992 to May 2017 but the header says Jan 1993...either way it misses the big crash in 1990-91.

Is it possible to use PortfolioVisualizer for 12-month absolute momentum on a price index like the Nikkei that is denominated in JPY and starting on 1-1-1990?

[ochotona]

The app needs a publicly traded symbol. But it only deals in dollars. If you know of an even older fund, we can use that then you can fudge that time series into yen. Any mutual funds that go into the 1980s?

[D1984]

The app needs a publicly traded symbol. But it only deals in dollars. If you know of an even older fund, we can use that then you can fudge that time series into yen. Any mutual funds that go into the 1980s?

The oldest Japan fund was Nomura Japan Fund; it was founded as Scudder Japan Fund (a closed-end fund) in 1962 and became an open end fund around 1987-88; Nomura bought them out a few years later but they kept the old Scudder-based ticker symbol (SJPNX). Unfortunately, "live" data for this fund is no longer available as it liquidated and merged with the Matthews Japan Fund in 2014

Commonwealth Japan Fund goes back to late 1989 (probably founded just at the tip top of the bubble when everyone thought Japanese stocks would always go up and Japan would own all the US by the next thirty years). Ticker is CNJFX; non-timed performance is available at https://finance.yahoo.com/quote/CNJFX/p ... ce?p=CNJFX . In USD likely so not quite as bad as in Yen but still....1990, 91, and 92 were awful for this fund.

DFA (of BAM, Swedroe, and small-value fame) also has a Japan fund that goes back to mid-1986; it is ticker symbol DFJSX and invests in smallcap Japanese equities.

All the other Japan mutual funds that existed in late 1989 or early 1990 have apparently been merged or liquidated at some point between then and the present day.

[ochotona]

The app needs a publicly traded symbol. But it only deals in dollars. If you know of an even older fund, we can use that then you can fudge that time series into yen. Any mutual funds that go into the 1980s?

The oldest Japan fund was Nomura Japan Fund; it was founded as Scudder Japan Fund (a closed-end fund) in 1962 and became an open end fund around 1987-88; Nomura bought them out a few years later but they kept the old Scudder-based ticker symbol (SJPNX). Unfortunately, "live" data for this fund is no longer available as it liquidated and merged with the Matthews Japan Fund in 2014

Commonwealth Japan Fund goes back to late 1989 (probably founded just at the tip top of the bubble when everyone thought Japanese stocks would always go up and Japan would own all the US by the next thirty years). Ticker is CNJFX; non-timed performance is available at https://finance.yahoo.com/quote/CNJFX/p ... ce?p=CNJFX . In USD likely so not quite as bad as in Yen but still....1990, 91, and 92 were awful for this fund.

DFA (of BAM, Swedroe, and small-value fame) also has a Japan fund that goes back to mid-1986; it is ticker symbol DFJSX and invests in smallcap Japanese equities.

All the other Japan mutual funds that existed in late 1989 or early 1990 have apparently been merged or liquidated at some point between then and the present day.

In portfoliovisualizer, CNJFX only tests back to 1998... any other ideas?

[D1984]

The app needs a publicly traded symbol. But it only deals in dollars. If you know of an even older fund, we can use that then you can fudge that time series into yen. Any mutual funds that go into the 1980s?

The oldest Japan fund was Nomura Japan Fund; it was founded as Scudder Japan Fund (a closed-end fund) in 1962 and became an open end fund around 1987-88; Nomura bought them out a few years later but they kept the old Scudder-based ticker symbol (SJPNX). Unfortunately, "live" data for this fund is no longer available as it liquidated and merged with the Matthews Japan Fund in 2014

Commonwealth Japan Fund goes back to late 1989 (probably founded just at the tip top of the bubble when everyone thought Japanese stocks would always go up and Japan would own all the US by the next thirty years). Ticker is CNJFX; non-timed performance is available at https://finance.yahoo.com/quote/CNJFX/p ... ce?p=CNJFX . In USD likely so not quite as bad as in Yen but still....1990, 91, and 92 were awful for this fund.

DFA (of BAM, Swedroe, and small-value fame) also has a Japan fund that goes back to mid-1986; it is ticker symbol DFJSX and invests in smallcap Japanese equities.

All the other Japan mutual funds that existed in late 1989 or early 1990 have apparently been merged or liquidated at some point between then and the present day.

In portfoliovisualizer, CNJFX only tests back to 1998... any other ideas?

Unfortunately, no....no other Japan-focused mutual funds are available that go back that far....I guess the DFA Japan small cap fund isn't in portfoliovisualizer at all?

Would it be possible to use the raw data and just do it in Excel? I have Nikkei data back to 1949--price only, not total return...but I have dividend yields back to 1985 for the Nikkei 225 so Total Return for the year can probably be cobbled together by dividing the yield by 12 and then multiplying by the number of months (since the the system checks momentum on a monthly basis using the month end close price and thus would either be in or out of the market for the whole of the month) the system was in the stock market vs in cash.

I have JGB t-bill and 6 month yields back to 1974 so the cash part of the returns should be a snap as well.

When you say absolute momentum, is that the one where stocks have to "earn" their way into the portfolio by showing higher returns (i.e. absolute momentum) than T-bills over a given period (say, the preceding 6 months or preceding year?). IIRC that is a "relative momentum" strategy.

[ochotona]

When you examine one stock or stock index, you are doing an Absolute Momentum analysis, because you are not comparing it to another stock or index. The way to define momentum that I use is total return over a 1 year span. That would include price change and dividends. The hurdle would be whatever your risk-free rate is... 90-day T-Bills, for example. If momentum > hurdle, then be long. If below, be gone.