You saw the backtest of the Cane Combo Ranking System in class. The backtest covered the 1999-2022 time period and was based on the Russell 3000 stock Universe.

2. Briefly explain the backtest's background calculations. In other words, how is the bar graph obtained?
4. What was the return SPREAD across extreme deciles in that backtest?
6. How do we find out whether the SPREAD is due to risk or mispricing? And what was our conclusion regarding this question?
8. What are the Russell 1000 and the Russell 2000 stock Universes?
10. Suppose we separately backtest the Cane Combo Ranking System in the Russell 1000 and the Russell 2000 stock Universes over the same 1999-2022 period. How do you think the return SPREAD across extreme deciles on these backtests would compare to each other? And compared to the Russell 3000 Universe? (Hint: Reason from your answer to Question 3).
12. Explain the logic behind your answer to 5. (Hint: Reason from your answer to Question 3)
14. Now consider two different quantitative managerswith the same set of quantitative signals. One manages $100 million while the other manages $10 billion. Which one is likely to be able to deliver superior returns to clients? How is this connected to your answers in 5 and 6?

Answer rating: 100% (QA)

Cane Combo Ranking System Backtest Explanation Background Calculations The bar graph in the Cane Combo Ranking System backtest is obtained through the following steps 1 Rank Stocks For each month in t... View the full answer