NNF10 Slippage Test

Recently there was a lot of talk about slippages in Smallcase eating into returns. We were surprised by this and decided to do a study on one of our smallcase products the NNF10 to start with.

The assumption used here is to not take the previous Friday Close as the model transaction point but use the Monday Open as the assumed transaction point.

This strategy was tested from Apr 16 to May 21 and the results were a bit surprising. We were expecting a nominal slippage.

We found that the results actually improved by 2.61% in this 5 odd year period. This may be due to gaps both up and down contributing to the variance in the returns . The variation ranged from +3% to -2.5% on extreme days but was a positive 0.04% on average. In bull markets there may be a case for more slippage and in bear markets a case for more positive gain. Overall in longer term we feel there is no adverse performance purely on this basis.

NNF10 is a monthly rebalanced strategy and has performed well vs the underlying NNF index.

We shall do more studies in the future when possible.

7 thoughts on “NNF10 Slippage Test

  1. What about taking Monday high as buyprice and Monday low for sellprice? I guess that would be worst case scenario.

    Like

  2. Recently Deepak from capital mind published a study on there momentum small case taking monday eod close price for buy and sell assuming. Of course there is no ideal way and some slippages are bound to happen

    Liked by 1 person

  3. Slippages are real, have been facing ever since I subscribed to ATH in Dec 20.
    It all depends when we are able to execute rebalance. Executing rebalance as soon as market opened may help.
    I stopped comparing the rebalance day % change as I have been bamboozled a few times and my returns are almost always lower than the baseline mentioned.
    But hey I am not complaining, its better than my MF portfolio 🤷.

    Liked by 1 person

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