Hi Toofuzzy.
I measured monthly reviews and when buy (sell) trades were apparent, update the paper AIM as though the trades were made as per standard by the book. I then revisited all of those and looked at how each group of consecutive sequential same direction AIM trades compared to had the trade been made at the month review after those trades - when no AIM trade was being indicated.
So if AIM indicated to buy in January, and again in February but then March indicated no trades, then I counted Ocroft's as being the comparison of that March review share price with the weighted average of what AIM paid for the shares in January and February. For example (keeping things simple), if 100 shares were bought in January at $10/share ($1000) and another 120 shares were bought in February at $9.50/share ($1140), then AIM averaged buying 220 more shares for a combined cost of $2140, or $9.727/share. Comparing that $9.727 share price with the end of March share price indicated whether by the book AIM or Ocroft had achieved the better outcome, if for instance March price was still at $9.50 then Ocroft had achieved a 9.5 / 9.727 average purchase price improvement (discount).
I repeated that for all AIM trades since 1871 keeping buys and sells separated, and then averaged the improvement (or lag) across all of those buys, and sells (to yield the final two figures that showed on the buy side Ocroft's provided a average 0.1% discount improvement, but on the sell side Ocroft's provided a 1.2% price improvement (sold shares for a average 1.2% higher price).
Ocroft uses other technical measures to try and buy (sell) at a better price and/or where the market has shifted to being on the "right side of the trade", however a delayed month and when the prior trend of falling (rising) was apparent via AIM no longer continuing to buy (sell) is a crude form of such potential 'past turning-point' prediction.
Doesn't always work out, for instance S&P500 AIM (end of month AIM reviews) has recently had two consecutive sell trades of Dec 2017 sell 10 shares at 2673.8/share and Jan 2018 trade of sell 9 shares at 2823.8/share, So $52,152.20 of cash proceeds raised from selling 19 shares = 2744.85/share average price. If at the current (February) month end review there is no further AIM sell trade being indicated, as currently seems most likely, then if the price at that time is less than that 2744.85/share weighted average AIM sell shares price then Ocroft's will have performed worse that by the book AIM in that particular case.
Ocroft has stated how if a share is terminal, then accumulating all purchases until AIM has stopped indicating buy trades could potentially avoid having injected additional funds month after month into a terminal case. Such that Ocroft on the buy side for something like XIV might generally be a good thing. For a broader/market index that is pretty much guaranteed to not fail however there seems to be little difference in executing buys as and when indicates compared to accumulating buys. On the sell side however there does seem to be a benefit from accumulating consecutive sell trades. The rising trend seems to sustain such that you on average end up selling shares at a higher average price than selling at each and every AIM indicated sell trade (momentum). Historically on average achieving a 1.2% higher sell price improvement.
Regards
Clive.
AI
