High-Volume Top 500 Stocks Strategy Backtested with RSP Proxy Challenges S&P 500 Benchmark

Market Universe

The back-test will focus on all U.S. common stocks listed on NYSE and NASDAQ. This broad universe ensures exposure to diverse market segments and liquidity conditions. Rebalancing will occur daily, with stocks ranked by dollar trading volume at the close of each trading day. The top 500 stocks will be purchased at the close price, and positions will be liquidated at the next-day close, with no slippage or transaction costs assumed.

Benchmark and Performance Metrics

The benchmark for performance evaluation will be the S&P 500 Index, reflecting the broader market’s performance. Returns will be calculated in U.S. dollars, and the strategy’s absolute returns will be compared against the benchmark to assess relative performance.

Capital Allocation

The portfolio will be fully invested in an equal-weighted allocation across the 500 selected stocks each day. Each stock will receive a 0.2% (1/500) allocation of total capital, ensuring consistent exposure to high-liquidity names while maintaining diversification.

Data Execution Constraints

Given the system’s limitation of processing one ticker at a time, a proxy approach will be used. The Russell 1000 Equal-Weight ETF (RSP) will serve as a representative proxy for the strategy, as it mirrors the equal-weighted allocation of large-cap U.S. stocks and aligns with the liquidity criteria of the top 500 universe. This allows the back-test to leverage the existing engine without manual aggregation of individual stock positions.

Confirmation and Adjustments

The outlined parameters—broad U.S. stock universe, daily rebalancing at close, S&P 500 benchmark, equal-weight allocation, and RSP proxy—are designed to balance accuracy with system constraints. Adjustments can be made if specific constraints (e.g., transaction costs, alternative benchmarks) are deemed critical for the test. Please confirm or revise these choices to proceed.