The Amelia Bedelia Mutual Fund

This how-to shows how to create a strategy in Equities Lab, and how to do some basic analysis of it. For humor value, we take the point of view of a children's book character, named Amelia Bedelia, who has no common sense. We have all felt this way some times.

This how-to shows how to create a strategy in Equities Lab, and how to do some basic analysis of it. For humor value, we take the point of view of a children’s book character, named Amelia Bedelia, who has no common sense. We have all felt this way sometimes.

Create A Screener

A quantitative mutual fund is a screener.  We are channelling our inner Amelia Bedelia.  She is a character in a series of children’s books that is totally lacking common sense.  This makes these books great to read aloud, assuming you can stop laughing long enough to actually read.

Name It

Screens without names are really hard to find.  So, she names it after herself.

Choose a size segment

Small cap stocks behave differently from large cap ones.  Many mutual funds therefore filter on company size.  Amelia does too — using her own special cutoffs.  When she’s done entering “4b < mc < 11.5b” she hits return then clicks on the green plus to get a new line.

Get rid of bad earnings

If earnings are bad, they must all go.  Get rid of companies that make money.

Change the dates to the testing period.

Chewing on her pencil as she works, Amelia decides to use 1998-2007 as her testing period.  To do this she clicks on each of the dates to change them.

Run the backtest

The dates changed, Amelia now clicks run to run the backtest.

Use industry performance

Amelia sees that the line is too close to the pesky brown line, and she should make them further apart.  She clicks on the green plus, or types “;” to add a new line.

Search for a way to rank across a cross section of companies

 Maybe buying companies in troubled sectors would help?   She clicks on the tools menu to search for rank.

Click on the search box

That search box looks handy.

Type rank

After she types rank into that search box, she sees the rank_across operator, which will do what she wants.  She can drag it into place, or type rank_across in the original search box, or even type ra into the original box, or double click the “rank_across” under the cursor.

What is she ranking

The first argument is what she’s ranking.  Here it is the “change” of the closing price over 1 year (252 days).

What’s the Where?

The third argument takes things that aren’t worth ranking out of the ranking table.  Since Amelia doesn’t like earnings, she doesn’t want companies that have earnings to be included.

Drag the eps into the where box

She types “and” in the where box, so she can include both the earnings, and the market cap filter.  She then drags the “>” that is between the EPS and 0 into the first empty box below.  She could cut and paste it, using ctrl X and ctrl V, but dragging is more fun.

Drag the second condition

One gone, one to go.  She drags it, wondering whether she will get an and with only one condition in it, and if so, what that would mean.

Click on “Equities Lab” window


Filling in the red box

Amelia has to fill in this last red box.  She’s heard that companies try to control their financials, and that seems good.  James Montier has a score that looks for these “manipulative” companies.  She could just delete the box instead, but she’ll just search for montier instead.

Type montier

Typing montier gives her the formula, which she double clicks on or drags.  Any value greater than two should do.

Click on “Equities Lab” window


Include trading costs

 Type “kini” into the tools search box and double click on Kini trading Costs.  Double clicking on a term when it has nowhere to go will create a new tab for it.  That’s just what she wants.  She does this.  The term being in your screener at all will ensure the correct trading costs are exacted.  A few tweaks made offscreen and her fund is ready to go!

Time to backtest!

She waits eagerly — is the green line going to be far enough from the red line?

Click on “Equities Lab” window


Click on “Equities Lab” window


See the results daily

she clicks the backtest table to see the returns as a daily return series.

Examine the results

She looks at the results, then thinks about exporting them to Excel.  Deciding against it, she looks at the backtest by time.

See the returns yearly

These returns can’t make up their mind.  Some years go up, and others go down.  This won’t do — the returns must all go in the same direction.  She goes to look at the report.

Pretty numbers

Amelia can see the negative sharpe ratio, the high standard deviation, the beta, and more.

Rebalance monthly

She clicks on trading rules to rebalance monthly.

Click on Rebalance Quarterly

Quarterly is not Monthly, so it must change.

Choose a monthly formula

The beginning of the month seems good.

Backtest again!


See the lower average return

Maybe this means the lines are further apart…


They are further apart.  Amelia’s work here is done.

About henry

Henry Crutcher is an avid family guy, board gamer (think Settlers of Catan, Puerto Rico, etc), computer nut, and all around geek. Hailing from Louisville, KY, he has noticed that the weather in Louisville is remarkably similar to the weather in Atlanta, GA despite the 407 miles that separate them. He has two daughters, one cat, and lots of trees. He loves the Miles Vorkosigan series from Lois McMaster Bujold, for its mix of SF, comedy and insight into how people work. He also comsumes more than his fair share of cheesy business/economics books, such as The Ascent of Money by Niall Ferguson, or Farewell to Alms, by Gregory Clark.