Wagner Award - ADVANCEMENTS OF ACTIVE INVESTMENT MANAGEMENT
2009 Paper Competition
Submitted Papers
Winning Research Paper:
Abstract: Tactical Equity Allocation Model (T.E.A.M.) 
A Quantitative Approach for Investing in Long-Term Trends by using Short-Term Mean-
Reversion Techniques to Optimize Risk-Adjusted Returns
Justin Lent, Independent Trader & Quantitative Trading Consultant
Additional Submitted Papers:
Opposites Attract
Improvements to Trend Following for Absolute Returns
Eric C. Leake, Anchor Capital Management Group, Inc.
The Parameters of Active Investing
Craig L. Israelsen, Ph.D, Brigham Young University
Use of Fundamental Data for Active Investing in US Equities
Howard B. Bandy, Ph.D.
Bond Mutual Fund Performance with Portfolio Characteristics
Fabio Moneta, Ph.D. Candidate, Carroll School of Management, Boston College
News Release
NAAIM Awards $10,000 Prize to Quantitative Trading Consultant Justin Lent for Advancements in Active Investment Management Research
April 22, 2009 – The National Association of Active Investment Managers (NAAIM) announced today that it has awarded its 2009 NAAIM Prize for Advancement of Active Investing to independent trader and quantitative trading consultant Justin Lent.
Mr. Lent was awarded $10,000 for his original research paper, “Tactical Equity Allocation Model (T.E.A.M.): A Quantitative Approach for Investing in Long-Term Trends by Using Short-Term Mean-Reversion Techniques to Optimize Risk-Adjusted Returns.” Mr. Lent will be recognized at a special awards ceremony preceding the NAAIM 2009 Uncommon Knowledge conference in Westminster, Colorado on Saturday, May 2, 2009 at the Westminster Westin Hotel.
Submitted and reviewed research was judged by a NAAIM committee on practical significance to practitioners of active investing, analytical rigor, novelty of results, and quality of exposition. Mr. Lent’s submission ranked particularly high in practical significance and novelty of results.
The approach detailed in Mr. Lent’s paper analyzes large-cap stocks forming longer-term trends because of the sustained buying or selling pressure put on them primarily by large institutions. The model includes three major steps:
1) A filter to identify a current subset of stocks within the S&P 500.
2) A mean-reverting signal that alerts the investor when one of the stocks within the subset is offering an opportunistic risk versus reward profile.
3) A simple exit criterion when the stock’s price action forewarns that the stock’s long-term trend is ending.
Weekly closing prices are used to determine long-term trends to filter “noise” of daily price volatility combined with daily closing prices for a short-term mean-reversion signal. Trades are executed weekly. Additionally, the paper addresses how to incorporate the hedging of stocks chosen for investment through the T.E.A.M. method in an effort to create market-neutral portfolios.
“The current bear market, following on the heels of the 2000-2002 decline, has led many investors to question the wisdom of buy-and-hold investing,” explains Jerry Wagner, one of NAAIM’s founding members, chair of NAAIM’s Advancement of Active Investing Committee and principal of Flexible Plan Investments, Ltd. “NAAIM members have always believed active is better, and studies by many academic researchers have supported that position. Our call for paperswas designed to support this research and shine the spotlight on those advancing this field of study.” Mr. Wagner continued, “Going forward, we expect many investors and financial advisors will recognize that long-term investing is best structured as a series of short-run strategies responsive to current economic and market conditions. That requires an active management approach.”
NAAIM issued its call for papers in November 2008 on the viability and use of active management through the practice of multiple trading decisions over a calendar year, using methodologies such as tactical allocation, exploitable market inefficiencies, hedging techniques, position sizing, dynamic asset allocation, sector rotation and long-short strategies.
Justin Lent holds a MBA in Finance from Santa Clara University as well as a BS degree in software engineering. He has worked as a trader, quantitative analyst, and market risk analyst in areas such as derivatives research, portfolio management and trading. As a consultant, Mr. Lent has conducted back-testing research for optimization of trading strategies and portfolio management solutions.
Top papers submitted to NAAIM’s Advancement of Active Investing Committee, including Mr. Lent’s, will be available on www.NAAIM.org.
About NAAIM
The National Association of Active Investment Managers (NAAIM) is a non-profit association of registered investment advisors who provide active money management services to their clients to produce favorable risk-adjusted returns as an alternative to more passive, buy-and-hold strategies. NAAIM membership is comprised of some 200 member firms nationwide, managing an estimated $14 billion. For more information, visit www.NAAIM.org.
