Bank Stocks: A Thought Experiment

1 Aug

I’ve been exploring a few ideas lately, particularly in the area of looking into whether certain movements in the Fixed Income markets can have a meaningful impact on bank stocks.

For the purposes of simplicity, the stocks I chose are those who are involved to some degree in actively trading the instruments that I am attempting to use as explanatory variables. More on this later, but I ran a backtest of buy and old on bank stocks throughout the crisis, assuming a monthly relabancing window:

Bank Stocks Portfolio Backtest - Long Only

Static Bank Portfolio Weights

The alternative strategy, which surprised me:

Using Partial Constraints On The Portfolio


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