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Vesper Capital Management and Exchange Traded Concepts launch new ETF


Vesper Capital Management and Exchange Traded Concepts has launched The Vesper US Large Cap Short-Term Reversal Strategy ETF (UTRN), an new fund that gives investors exposure to a select group of stocks within the S&P 500 that have the potential to benefit from a unique trading anomaly, short-term reversal.

“We aim to launch new products that provide a real innovative approach to investing with ETF’s and UTRN certainly does that,” says Garrett Stevens, CEO of Exchange Traded Concepts, the Issuer for the Fund.
The Vesper US Large Cap Short-Term Reversal Strategy ETF is a great tool for all investors to capture a unique high-turnover, high potential alpha trading strategy. Based on the UTRNX index, which is calculated by S&P Dow Jones Indexes, UTRN provides investors with the opportunity to capitalise on the tendency for stocks which have experienced sharp, short-term declines to quickly bounce back or rebound.
UTRN attempts to improve on this market anomaly (Short Term Reversal) by applying a proprietary methodology – the Chow Ratio – to identify stocks that have the greatest potential for a weekly rebound. “UTRN ranks stocks in the S&P 500 based on the Chow Ratio, choosing 25 stocks with the most attractive (lowest) chow ratio score for inclusion in the index each week. A stock is only removed from the portfolio on rebalancing if another stock has a lower value,” says John Thompson, President of Vesper Capital Management.
UTRN is a Rules-Based Short-Term Contrarian Strategy that is based on over 50+ years of academic research. “If investors overreact to new information, and if that overreaction is consistent, then it may be possible to construct trading strategies to benefit from this behaviour,“ says, Dr Victor Chow, Senior Investment Consultant at Vesper Capital Management. Chow builds on the research of fellow academics, DeBondt & Thaler (1985), Lo & MacKinlay (1990) and Jegadeesh & Titman (1993). While academic literature has identified the tendency of short-term losing stocks to experience rapid rebounds, not all such stocks will bounce back. Dr. Victor Chow created the Chow Ratio to identify those stocks with the greatest potential to rebound.
Investors may overreact to recent negative stock news driving the stock price down disproportionally and temporarily. Additional corporate events such as getting called down to Washington DC to testify to a Grand Jury, unplanned succession news, sexual harassment claims against a “C” suite executive, product recalls or a Twitter “tweet” storm involving the company may also temporarily drive down a stock’s price.
Just as the overall market can spike on good news, entire sectors can be dragged down by negative news over a short time period. A global macro event like an interest rate hike or easing, oil price volatility, war, global trade weakness, and geopolitical changes may pull both good and bad stocks in a sector. However, not all companies in a sector are equal, there are likely to be several companies within a sector with better fundamentals. The Chow Ratio seeks to identify those stocks better able to weather the storm.
For Financial Advisors, UTRN can potentially add alpha to a more traditional S&P 500 allocation with lower volatility. UTRN may be appropriate for investors seeking a high-conviction, high active-share strategy.

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