This daily publication is intended to spark debate among traders, investors and academics, particularly

within the statistical arbitrage community. The portfolio is based on a simple premise: sometimes stock
prices revert to some historical mean but more often they don’t. In a normalized, shares-neutral
portfolio, prices are generally mean-averse.

Link to spreadsheet from Scribd.com: S&P 100 Long-short Spreadsheet

S&P 100 Long-short Portfolio

(Shares per $1M)

11/12/09 11/13/09
Long/short Balanced Long/short Balanced
13.20 43 30 AA 13.18 14 10
201.99 332 235 AAPL 204.45 349 249
53.23 29 21 ABT 52.95 -24 -17
31.39 -132 -94 AEP 31.62 -126 -90
28.86 -184 -131 ALL 28.91 -193 -137
55.22 -296 -210 AMGN 55.41 -309 -220
130.53 747 530 AMZN 132.97 773 552
34.47 177 126 AVP 35.10 218 156
39.50 511 363 AXP 40.35 560 400
50.28 -54 -39 BA 50.68 -47 -33
16.06 56 40 BAC 15.98 9 7
54.76 -281 -199 BAX 54.82 -290 -207
41.43 -172 -122 BHI 41.45 -182 -130
27.30 -310 -220 BK 27.45 -311 -222
23.12 -59 -42 BMY 23.18 -77 -55
97.99 368 261 BNI 97.97 328 234
4.06 -337 -239 C 4.05 -358 -255
58.57 348 247 CAT 58.78 338 241
80.50 19 14 CL 81.49 45 32
15.33 -165 -117 CMCSA 15.43 -172 -123
38.37 237 168 COF 38.80 264 189
52.22 34 24 COP 52.83 58 41
60.12 90 64 COST 60.47 86 61
33.12 -31 -22 CPB 33.18 -54 -38
23.40 -28 -20 CSCO 23.71 6 4
29.67 -679 -482 CVS 30.25 -603 -430
77.42 -33 -24 CVX 77.94 -30 -21
33.87 80 56 DD 34.31 105 75
15.45 56 40 DELL 15.40 15 11
29.05 67 47 DIS 30.44 229 164
28.60 691 490 DOW 28.47 605 432
67.30 -123 -87 DVN 67.79 -110 -78
16.75 -9 -6 EMC 16.88 3 2
76.79 -281 -199 ETR 78.64 -203 -145
46.07 -474 -336 EXC 46.61 -440 -314
8.20 449 319 F 8.41 514 367
81.16 454 322 FCX 81.57 447 319
80.76 230 163 FDX 81.97 260 186
66.72 66 47 GD 67.68 97 69
15.75 50 36 GE 15.66 -3 -2
46.88 -161 -115 GILD 47.05 -177 -126
567.85 294 208 GOOG 572.05 291 208
178.48 111 79 GS 176.76 43 31
30.30 217 154 HAL 30.71 254 181
27.24 -36 -25 HD 27.34 -54 -38
41.74 -16 -11 HNZ 41.86 -31 -22
38.57 14 10 HON 39.25 56 40
49.70 147 104 HPQ 49.91 136 97
126.26 49 35 IBM 127.03 46 33
19.68 -3 -2 INTC 19.82 -2 -2
61.15 -131 -93 JNJ 61.43 -139 -100
43.30 -24 -17 JPM 42.90 -80 -57
26.84 -213 -151 KFT 26.91 -226 -162
55.94 52 37 KO 56.46 60 43
74.10 -285 -202 LMT 76.07 -202 -144
21.47 -75 -53 LOW 21.85 -38 -27
236.89 241 171 MA 234.72 174 124
62.17 -25 -18 MCD 63.58 38 27
39.83 100 71 MDT 39.46 29 20
34.35 -223 -158 MET 34.22 -256 -183
77.21 85 60 MMM 77.32 65 46
19.02 -3 -2 MO 19.26 18 13
74.35 -321 -228 MON 73.58 -396 -283
32.98 -8 -5 MRK 33.10 -18 -13
33.01 90 63 MS 33.09 77 55
29.36 290 206 MSFT 29.63 292 208
64.09 27 19 NKE 64.42 25 18
44.17 79 56 NOV 44.17 59 42
51.26 161 114 NSC 51.67 167 119
12.33 173 123 NWSA 12.61 237 169
26.94 -223 -158 NYX 26.71 -280 -200
22.04 -48 -34 ORCL 22.34 -23 -17
81.81 93 66 OXY 82.45 101 72
61.27 -85 -61 PEP 61.94 -62 -44
17.62 12 9 PFE 17.59 -24 -17
61.30 24 17 PG 61.61 18 13
49.96 11 8 PM 50.15 -4 -3
44.85 -73 -52 QCOM 45.77 -23 -16
4.77 -576 -409 RF 4.83 -535 -382
48.56 -82 -58 RTN 49.03 -72 -52
3.05 -834 -591 S 3.10 -776 -554
64.60 56 40 SLB 65.52 93 66
11.84 130 92 SLE 11.94 137 98
31.59 -257 -182 SO 31.58 -279 -199
26.29 -177 -125 T 26.25 -209 -149
48.93 -8 -6 TGT 48.99 -21 -15
31.54 84 60 TWX 31.95 110 78
25.37 189 134 TXN 25.44 164 117
28.76 30 21 UNH 29.08 46 33
56.83 -84 -60 UPS 56.69 -121 -86
24.00 64 45 USB 23.48 -48 -34
66.70 149 106 UTX 67.99 197 140
30.16 -217 -154 VZ 30.13 -248 -177
39.12 125 88 WAG 39.38 128 91
28.22 -35 -25 WFC 27.68 -137 -98
19.84 140 99 WMB 20.05 158 113
53.24 -67 -47 WMT 53.20 -103 -74
38.12 -52 -37 WY 38.36 -48 -34
 71.90 -233 -165 XOM 72.47 -221 -158
7.85 -143 -101 XRX 7.86 -161 -115
505.45 $290,737 OEX 508.08 $286,241

The graph shows the performance of unconstrained long/short mean-averse and mean-reversive
portfolios. Time is noted in days.

The results depicted in the graph are for no-leverage portfolios. Long and short positions, determined
using a form of the Kelly criterion as modified by Thorp, are fully-collateralized (100% margin). Positions
are adjusted weekly to maximize productivity and to minimize slippage and transaction costs. Returns
are compounded.