No. of Recommendations: 6
In the same sense that the SI "index" was used as an example that
quant investing still works and isn't dead, then a VL MI index should be
unbiased to be able to show the same thing. So, no fair using popular screens.
The plurality of practitioners use monthly holds, and we should not make
any assumptions at all about what screens they use.
So my suggestion for a VL index would be an equally weight monthly rebalanced
monthly trading cycle portfolio of all post discovery long VL screens.
About the only variable is how deep; I suggest top 4.
The weekly trade ledgers track 3 and 5, so 4 gives a nice compromise.
That's what Zee used for a lot of his "what screen" research.
A lot of research shows that a lot of the performance is concentrated
in the topmost ranks, so I prefer 4 to 5.
"Post discovery" is easy if it's generated from the weekly picks.
Since the purpose is to see what the typical screen would have done, you'd of
course multiply-weight things picked on multiple screens—a blend, not an SOS.

In an ideal world I'd make the index level equal to the average dollar portfolio
value of four 4-week-hold portfolios trading at market close on the
first trading day of each week.

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