Moonshot strategy that shorts stocks that fell 10% or more the previous day. Despite the proverbial idea of the "dead cat bounce," this strategy exploits the tendency of stocks that suffer large one-day losses to keep falling the next day.
This tutorial also demonstrates how to run a multi-country backtest to find where an anomaly works best. Uses global equities data from EDI.
The markets tested are the 10 largest markets (ranked by number of primary listings) that are (1) outside the US, (2) tradeable through Interactive Brokers, and (3) shortable through Interactive Brokers. Note that the US market is excluded due to SEC Rule 201 (Alternative Uptick Rule), which restricts short-selling of stocks that fall by 10% or more.
The list of tested markets includes: