Subject: Re: A New High Price Screen
Bob....

(1) The concept is intriguing but needs a deeper look and much better understanding. Someone like Jim needs to weigh in a bit.

Please refer to what I initially said and elann said - "it might just be leading down the garden path - based on what you want to believe". While Ray completely trashed it - saying it has look-forward bias ( technical interpretation of what he said) - NOT TRUE ..... but there's a catch.

(2) The screen has a hidden "survivorship bias" - this is because you start with a Pool of stocks and assume the price ( embedded in the appreciation/depreciation as indicative) and you will have them till the end of the study period : INCORRECT.

There's a EXIT/DROPOUT route - thru Stock-Splits. I dont have access - but if you look thru the picks you will find Alphabet/Google, Apple, NVDA , not sure about Tesla ( since Free Cash Flow is a criteria) etc amongst the picks and then being censored ie Non Surviving once the Split is done.

So the KEY QUESTION: Does picking a High price stock and holding it till a Split ( which may or may not happen) - provide great returns? IDK>

(3) and because of the above and based on whatever little knowledge I have of the market - this is basically (skewed) as a Berkshire (A class) , NVR ( They are a conservative Homebuilding/Real Estate Company) screen. Those 2 are the longest running stocks without a split ( Note BRK-B is not on this) . The latest entrant to the list would be Booking.com

I tried to run a test using those 2 to compare - but GTR1 keeps giving me errors

(4) One key robustness test of this concept could be to ensure that ALL stocks that are eligible at the start are adjusted upwards for Stock splits and downward for reverse ones ( this is rare - because most of the time this happens in the lower end of the spectrum ie rarely do you see a $150 stock do a reverse and become a $1500 stock) and then compare it to the screen to understand its fundamental edge

OT : Bob .... be very very careful about using direct price in these ML learners. They simply would end up "committing it to memory" associating it - and then going forward if price moves away - the rules will not have support.

Also Last Price being best bet = Random Walk theory.

Suggestions/Alternatives : Follow the percentile concept like you did for the screen - Both Between Groups - ie Close as a % tile of all the classes of stocks in the cohort and Within group - ie %tile of the stocks price relative to itself ala Stochastics ( its funny how much of TA is simply a renaming/repackaging of Basic Statistical measures!)

Best