QARMA Performance on Extreme Market Move Days Addressing Questions by Garrett Jones

Partha Chakraborty, Ph.D., CFA

Since Sep 15, 2010, there have been 35 instances where S&P went down by -1.5% or more. We study QARMA live net returns and Strategy Alpha (= QARMA net return – S&P 500 return).

For example on 8/10/2011, S&P returned -6.65%, while QARMA Alpha was +8.3%, implying QARMA net return of +1.65% ( = -6.65% + 8.30%) Observations:

1. Positive Alpha: Not a single day did QARMA have a negative alpha, implying that QARMA outperformed S&P on every single extreme down days.

2. Avoidance of Negative: 54.3% of these days QARMA actually had positive net return. 3. Average return is positive: Average QARMA return = +0.29%, Average S&P Return = -2.49% for

these extreme days. Thus average alpha for the extreme down days = +2.78%. Conclusion: On live trade QARMA has proven demonstrably superior on extreme down market moves.

-1.59% -1.59% -1.78% -2.05% -1.57%

-1.89% -1.95% -2.27%

-1.74% -1.81% -2.03% -2.56%

-4.78%

-6.65%

-4.37% -4.45%

-1.50% -1.55%

-2.52% -2.67% -2.94% -3.19%

-2.04% -2.50%

-2.85%

-1.94% -2.00% -2.47%

-2.79%

-3.67%

-1.66% -1.68% -1.86% -2.21% -2.11%

0.75% 1.45%

1.79% 1.68%

0.76%

1.69% 1.87%

3.40%

1.28% 1.84%

2.74%

3.69%

4.54%

8.30%

4.80%

6.62%

1.09% 1.14%

2.84% 2.81%

5.43%

4.29%

2.43% 2.39%

3.90% 3.46%

2.68%

0.48%

3.70% 4.27%

1.37%

2.72%

1.59% 2.01%

1.50%

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%QARMA Return Premium over S&P on Extreme Market

Days (S&P Return < = -1.5%)

S&P Alpha