A.I.M. Users Bulletin Board

[ls7550]

It was late when I posted #21156 (local time = board shown time + 5 hours). Too much, Beta (blocking) and not enough Omega3 ;>)

The market has a beta of 1 by definition. The reason for that is because the term beta is useless without any sort of benchmark. The proxy for the market is usually the S&P 500 since it is impossible to use the actual market which would be a combination of all assets (realty, equity, fixed income, etc).

The S&P500 for me, being UK based has currency risk and therefore diversifiable risk. As you say beta is relative. From a universal perspective however, I was inferring that in respect to what Dave posted, perhaps selecting a local market that had been relatively quiet, and selecting within that low priced assets, may, relative to global subsequent activity, produce subsequent above average rewards compared to that of having selected high priced assets from within noisy local markets.

As Dave also pointed out however, AIM's trading element benefits more during zip-zagging price ranging, attempting to pick off lows and highs along the way. The risk-free (cash) component provides a degree of downside stock price protection. As such it betters buy and hold in two out of three cases, losing out only to rising price trends. If you reversed AIM's buy and sell signals, adding to positions when AIM signalled a sell and visa-versa, then it would have a tendency to outperform during Bull phases and lower losses during Bear phases.

Such sayings as bottom fishers become cotton pickers and the trend is your friend spring to mind. AIM knows this and as such limits its trading accordingly. Collectively AIM lowers day to day ongoing volatility - that is your paper profits or losses swing less than that of buy and hold. However AIM is not a holy grail and a penalty is that over the longer term it is less likely to outpace buy and hold on a real profits across a start to end period basis.

Regards. Clive.