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Macroaxis relative portfolio strength score (MARPS)

MARPS Overview

Macroaxis relative portfolio strength score (MARPS) is simply the number between 0 and 100, representing performance of our user's holdings, as compared to holdings of other investors. The MARPS presents weighted average of your position risk adjusted performance in contrast to the average position of all registered investors. For example, if your score is in the middle of the bar (or 50), you are performing as an average investor. As your score increase or decreases you move towards either end of the bar. The score of 0 means that your portfolios either generate average negative expected return or performs very poorly.

Since most investors use various time horizons, have different tolerance for risk, and hold different number of securities from different industries, you have to be careful when interpreting the relative score of your position. Think of your score as a naive interpretation of where you position stays in relation to the position of other investors. As our investor community grows we adjust the calculation of the relative score to account for individual time horizons, different tolerance for risk, sector and industry allocations, as well as number of securities in your portfolio and types of financial instruments.

MARPS algorithm

The formula to derive MARPS score is based on multiple factors that are weighted according to Macroaxis proprietary algorithms. It heavily relies on Modern Portfolio Theory (MPT) as well as the various factors of diversification. Among other things, these algorithms take into account portfolio expected return and risk, number of assets, market volatility, industry, country, and types of securities that compose user portfolios. As our service evolves the algorithm will become more sophisticated to take into account other economic, market and company specific variables.

MARPS calculation and updates

At this point to calculate MARPS score users have to run one of our analytical modules from Wealth Management Toolset. The updates to the score will be scheduled within a short period of time and will be performed weekly, unless user runs one of the provided analytics.

References

Modern Portfolio Theory From Wikipedia, the free encyclopedia Learn About Modern Portfolio Theory (MPT)
Markowitz, Harry M. (1952). Portfolio Selection, Journal of Finance, 7 (1)
Sharpe, William F. (1964). Capital asset prices: A theory of market equilibrium under conditions of risk, Journal of Finance, 19(3)
Lintner, J. (1965). The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets, The Review of Economics and Statistics, 47 (1), 13-39
Burmeister E and Wall KD., The arbitrage pricing theory and macroeconomic factor measures, The Financial Review, 21:1-20, 1986
Chen, N.F, and Ingersoll, E., Exact pricing in linear factor models with finitely many assets: A note, Journal of Finance June 1983
Fama, E. and French, K. (1992). The Cross-Section of Expected Stock Returns, Journal of Finance, June 1992, 427-466
Black, F., Jensen, M., and Scholes, M. The Capital Asset Pricing Model: Some Empirical Tests, in M. Jensen ed., Studies in the Theory of Capital Markets. (1972)
French, C. W. (2003). "The Treynor Capital Asset Pricing Model", Journal of Investment Management, 1 (2), 60-72
Lintner, J. (1965). The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets, Review of Economics and Statistics, 47 (1), 13-37
Markowitz, Harry M. (1999). The early history of portfolio theory: 1600-1960, Financial Analysts Journal, 55 (4)
Tobin, James (1958). Liquidity preference as behavior towards risk, The Review of Economic Studies, 25 Treynor, J. L. (1961). "Market Value, Time, and Risk." Unpublished manuscript.
Treynor, J. L. (1962). "Toward a Theory of Market Value of Risky Assets." Unpublished manuscript.