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Subject:  Re: CAPS is not meant to be a mirror of performa Date:  2/5/2007  10:40 PM
Author:  AssetMangler Number:  4823 of 9765

Note that this is a serious discrepancy between CAPS and the real world. In the real world, outperforming the market by 5% in a month is much more valuable than outperforming the market by 5% in a year - yet CAPS scores them the same.

I've proposed in the past that CAPS measure annualized return after a certain minimum period of time (its about those darned small denominators) - say 6 months to a year. I've also suggested that picks unmade be charged as cash. These two things would, as a start, make scoring much more realistic.

Plus, as noted above, CAPS' require a 5% gain for accuracy points, so it does limit the utility of betting on the variations around the market mean.

The other thing to consider is that picking big-cap stocks that are part of the SP500 and that have a lower beta (less daily movement than the market) may be counterproductive to the return-to-the-mean thing as well. I have this vision of this herd of lumbering big-caps lamely and unspectacularly following the bovine twists and turns of the already lame and unspectacular index - and never reaching it. You don't want to load yourself down with too many "dead money" picks, as I am finding, to my further 1.34 ranking chagrin.

Wow, we've been back and forth on this stuff for a long time. What WAS the point of CAPS again?

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