Dow Jones LSP Indexes

[RVince]

I've had some great feedback on people using LSP-style portfolio
construction in the real world, in their trading, even in
hypotheticals. As many of you know, Dow Jones has licensed the LSP
methodologies in creating active indexes for licensing to various
hedge funds, CTAs, money managers, SMA's and maybe even ETFs (though,
I hope not the latter).

I bring up the following because it comes from DJ, in their doing
their due dilligence on LSP. When they applied the particular path
that the indexes are licensed upon, to the S&P 500*:

From 12/31/99 through 12/31/2010:

Avg return per year:
S&P 500 0.41%
DJ LSP 500 9.84%


Drawdowns:
S&P 500 Index -50.95%
Dow Jones LSP 500 Index -6.30%

months
avg return capture
+
- + - + -
S&P 500 78 54
3.21% -4.28% 96.63% 98.63%
Dow Jones LSP 500 Index DJ LSP 500 94 38 1.58% -1.12%
49.48% 16.37%



yearly returns: 2010 09 08 07 06
05 04 03
S&P 500 15.06% 26.46% -37.00% 5.49% 15.79% 4.91% 10.88%
28.68%
DJ LSP 500 6.51% 26.98% 6.59% 5.99% 8.53% 5.36% 5.54%
15.77%

Note -- these figures include the real-life survivorship problems of
the decade in question, the Enron's, Lehman's, GM's etc.

What I find most heartening is these arent numbers I concocted --
these are independent, and an index other than a DJ Index (they have
run the same path, same logic, same, robust parameters, on all sorst
of indexes, domestic and foreign, all similar results, some better,
some worse).

I find it very heartening that this appraoch to portfolio construction
-- that of LSP paths to accomodate varying criteria -- is viable and
has value. All of this is sans any kind of market selection or timing.

[Brady Preston]

Those are some amazing results.