PEG Stock Selection with Expected Shortfall Risk Parity
Summary
This post outlines a Peter Lynch-style equity selection rule based on the price-to-earnings ratio divided by a growth rate. Stocks with PEG below 0.5 enter the candidate pool; when that does not fill the available slots, existing holdings below 1.0 can be used as additions. Among candidates, smaller market-capitalization stocks receive priority.
Portfolio weights use expected shortfall risk parity, with daily portfolio volatility constrained to about 3% based on expected shortfall and value-at-risk estimates. The portfolio holds at most five stocks and rebalances every 15 trading days. The author reports that excluding cyclical and project-based industries materially improved drawdown, but provides no performance series, universe definition, growth-rate calculation, or detailed risk-estimation procedure. The post is therefore a compact strategy description rather than evidence sufficient to assess robustness or implement it unambiguously.
Key ideas
- PEG is calculated as the price-to-earnings ratio divided by a growth rate.
- Stocks below a 0.5 PEG threshold are preferred, with holdings below 1.0 used to fill remaining capacity.
- Smaller market capitalization is prioritized among eligible stocks.
- Expected shortfall risk parity determines allocation under a stated daily volatility constraint.
- The portfolio is limited to five stocks, rebalanced every 15 trading days, and excludes cyclical and project-based industries.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.