The Average Investor's Blog

A software developer view on the markets

The Tame RUT (Russell 2000)

Posted by The Average Investor on Aug 24, 2011

The Crazy RUT post on R-bloggers caught my attention some time ago. The main point is that there is no dominant strategy for RUT (the Russell 2000, small-cap index) based on long-term moving averages. My recollections from me back-testing many moving averages on this index were similar. So, I got curious – would the Crazy RUT be too much for my ARMA strategy to handle?

Russell 2000 ARMA vs Buy-And-Hold

Although impressive, it is obvious that most of the gains happened during the bull market of the 90s. The same chart for the period since 2000 confirms.

Russell 2000 ARMA vs Buy-And-Hold (2000 onwards)

Still outperforming buy and hold but by a much narrower margin. In fact, if we begin the comparison in 2002, it might be that buy and hold performed better. This is clear from the annual performance:

Year Buy-And-Hold ARMA
2011 -17% 1%
2010 25% 25%
2009 25% -3%
2008 -35% 1%
2007 -3% 23%
2006 17% -7%
2005 3% 5%
2004 17% -5%
2003 45% -6%
2002 -22% -16%
2001 1% 26%
2000 -4% 44%
1999 20% 21%
1998 -3% 61%
1997 21% 55%
1996 15% 26%
1995 26% 41%
1994 -3% 40%
1993 17% 50%
1992 16% 40%
1991 44% 82%
1990 -21% 54%
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