SMART index, which tracks the performance of the Dow Industrials in the first and last half-hour of trading... when "smart money" deploys capital. Capturing the information content of traders with an edge, and thus providing insight into future returns.
Now given that the SMART index only captures 15% of the trading session, it makes little sense to compare the nominal returns of this index to the Dow. The standard deviation of the percentile divergence between the two is 35%. If the SMART index truly is smart, then if its percentile is well above the Dow, then the latter should enjoy outsized returns as it plays catch up. If the SMART percentile drops precipitously below the Dow's, then that should bode ill for future stock returns.
In fact, a simple strategy that trades when the 35% threshold is breached and holds the position until the percentiles cross over has on aggregate made no money over a window of nearly fifty years.
Source: Bloomberg Pro Terminal
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