Potential F-fund strategy???

**ChemEng** · 03-06-2007, 04:23 PM

I was looking around the Lehman Bros U.S. Aggregate Index overview sheet this morning (taken from http://www.lehman.com/fi/indices/pdf...gate_Index.pdf) and noticed this line Rebalancing portion of the overview:

Reinvestment of Cash flows: Interest and principal payments earned by the returns universe are held in the index without a reinvestment return until month-end when it is removed from the index.

I read this to mean that any interest and principle payments from the bonds are held until the end of the month. Then the price is readjusted accordingly based on the amount of cash that was generated.

From that, I did some analysis between the last and first days of trading in the F-fund. I ended up with a spread of returns ranging from -6 to +5 cents. Not to promising.

I then considered the activity of the F-fund during that month to see if there was a correlation between first of month returns or not. This is what I got:

Presentation1.jpg

Its a plot of the change between the last and first days of trading on the y-axis and the percent return for the previous month on the y-axis. See anything interesting? Look again:

Presentation2.jpg

If the return for the month is greater than 1.011%, there are 2 negative days on the first trading day of the month.

Of course, that doesnt guarantee a return either because 3 of those days with previous month returns >1.011% gained 0 cents. But there are roughly twice as many returns that gained a penny than 0.

Is there anything here worth pursuing? Im thinking this may help increase the returns for those interested in penny chasing.

Thoughts? Comments?

**tsptalk** · 03-06-2007, 04:37 PM

If there is a discernible pattern than I say it is worth pursuing. Nice work.

**350zCommTech** · 03-06-2007, 04:40 PM

Originally Posted by ChemEng

Is there anything here worth pursuing? Im thinking this may help increase the returns for those interested in penny chasing.

Thoughts? Comments?

Thank you for making this post. I just remembered about the note I made to myself about a month or two ago. I did some research about the F fund(don't remember where I got the info) and here is what I came up with:

Note to self:
Go to F fund for end of Feb, may, aug, and nov.

I think it had to do with bond auctions or something like that. I think I went back a year at TSP.gov to confirm the gains. I wish I had remembered that note prior to last week.

**ChemEng** · 03-06-2007, 04:42 PM

I had to correct it to adjust the % returns calculator. The gave 2 days with a negative first trading day of the month return for a month that had greater than 1.011% return. Still 4 to 1 odds are pretty good. If you increase the decision rule to 1.013%, then the odds go up to 7 to 1.

**nnuut** · 03-06-2007, 04:48 PM

Yes! I can see it on the charts! Get in on the 3rd or 4th day of the month and catch little bounce most of the time, something to work on. Every penny earned is a penny----------or visa versa.

http://finance.yahoo.com/charts#char...urce=undefined

**ChemEng** · 03-06-2007, 04:55 PM

Originally Posted by nnuut

Yes! I can see it on the charts! Get in on the 3rd or 4th day of the month and catch little bounce most of the time, something to work on. Every penny earned is a penny----------or visa versa.

http://finance.yahoo.com/charts#char...urce=undefined

Not sure we are talking the same things. Im proposing that you IFT into F on the last trading day of the month and then leave on the first trading day of the next month if that month had a return >1.011%.

**nnuut** · 03-06-2007, 05:05 PM

Oh, stay one day! I noticed there was a little bounce almost every month starting on the 3rd or 4th day. Using Yahoo's new charts you can move the cursor to any day of the month and get results for that day. This is a different thing, sorry!

**ChemEng** · 03-06-2007, 05:20 PM

Im not disagreeing with you nnuut. Im just saying what my analysis showed. There may be more meat to this than I have looked at (and Im sure there is based off what you and 350z have mentioned.) This is just a starting point to grow from if people are interested...

**Rod** · 03-06-2007, 05:35 PM

Originally Posted by ChemEng

Not sure we are talking the same things. Im proposing that you IFT into F on the last trading day of the month and then leave on the first trading day of the next month if that month had a return >1.011%.

Which month are you talking about as it pertains to a return of >1.011%

The IFT into month

or

The IFT out of month

I'm thinking "Out Of", but want to clarify.

Thanx

**ChemEng** · 03-06-2007, 05:38 PM

Originally Posted by Rod

Which month are you talking about as it pertains to a return of >1.011%

The IFT into month

or

The IFT out of month

I'm thinking "Out Of", but want to clarify.

Thanx

You got it. For example: If F-fund compound return for January was greater than 1.011%, then you would buy into F on the last trading day of January and out on the first trading day of February.