The Public Report just got a little bit longer! Starting today, our readers will notice additional information in the Daily Report. The first five pages break up the signal by model and explain how each model works. However, we felt it would be useful to end the report by building the signal back up by showing each indicator’s contribution to the combined signal. The values add up to the daily target position percentage, so one can quickly see which variables are driving our stock market exposure.

As we have mentioned in earlier blogs and publications, stock market exposure can range from short 100% to long 200%. We scale the daily allocations to target a volatility equal to 80% of the long-term stock market volatility. The HTAA ensemble of models has more than 40 individual inputs. However, only inputs that are currently included in the models will show up on the Signal Decomposition table. Screening criteria can change the mix of inputs used to forecast stock market returns, so the list of inputs in the table below can change from time to time. Therefore, seeing a variable with 0% value does not mean that a variable is not included, only that it has a neutral contribution to our daily position. It is also useful to remember that removing a variable from a regression model would alter all existing coefficients, and removing a model from our ensemble would impact the weights of all remaining models, so the number is just an approximation of the total effect of the variable. The goal of this report is to help explain the relative impact of each indicator and to guide us in the future development of this ensemble of models.

Here is a sample Signal Decomposition Table from 1/5/2018:

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