Backtesting of the TD Ameritrade Investor Movement Index (as it will be called) seems to prove Quirk right.
At
the start of December, as markets treaded water on fiscal cliff fears,
the indicator shot to its highest reading since January 2012. So despite
all the headlines, the active retail investor was ratcheting up risk,
buying equities, options and ETFs–in some cases with leverage—that stood
to benefit from a solution to the "fiscal cliff."
If you believe the retail investor is "buys high and sells low" you can fade the market whenever this index goes higher. I would love to see academics test this index to see how well it works as a predictor a few weeks or months out. This other feature that TD Ameritrade is putting out seems interesting as well:
The next iteration for TD Ameritrade, sources at the firm said, will
be for users to be able to see which individual stocks and ETFs others
hold. Also, that data will be aggregated so traders can see how their
portfolio stacks up to others.
For example, you would be able to
enter someone with your same age and risk profile and see which stocks
and funds they own. Perhaps even track their moves.
The social
networking arena is the next big push for online brokers like TD, as
they strive to get more traders, especially younger ones.
It will be very interesting to compare these aggregated small investor holdings to the portfolios of the big-time investors like Seth Klarman and Leon Cooperman that you can get on GuruFocus. I would bet on the pros of course but it might be interesting to see if they are actually beating the small investor by very much or not.
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