# SUE and Relative Strength

Was the definition of SUE correct and were they beating the benchmark since 2004 based on the Relative Strength chart?

i think the relative strength indicated that it was under performing. not sure though

I think SUE was the rght defn and Relative Strength indicated it was underperforming… values kept increasing but all under 1 so it must have been underperforming the index…right?

I put outperforming since the numbers were increasing starting in 2004, but also not sure.

yeah, it was under 1. that was my interpretation. it was a guess but hopefully it worked out

I thought it was under - performance as SUE was less than 1 for most years. Was thinking >1 would be better actual / benchmark I could be totally wrong on this.

From a finacial glossary (very popular…so I dont have to even mention it…) SUE = the earnings surprise at a given time divided by the standard deviation of earnings surprises measured over some historic period such as the previous 20 quarters. Consider a stock that had a \$0.03 earnings surprise, and that the standard deviation of past earnings surprises is \$0.05. The surprise is smaller than normal, and the standardized earnings surprise would be \$0.03/\$0.05 = 0.

sorry that was 0.6, whcih means it underperformed…goes to say that answer for the above is if less than 1, under performance by companies

They made this problem tricky because the table showed data from like 2001 (or sometime around that) but the question asked “since 2004.” Even though it was still below 1.0, it appreciated from 2004 to 2007 so the correct answer is that it outperformed. Unless I’m totally stupid. I actually had to reread that one because I didn’t pay enough attention to the wording the first time.

pg 477 in the CFAI asset valuation book indicates that a value under 1 means that it is under performing.

did the question ask about RELATIVE perf. since 2004 (vs 2001 and prior) or ABSOLUTE perf. since 2004 (vs market/bench) ??? that probably holds the key to this

goblue06 Wrote: ------------------------------------------------------- > They made this problem tricky because the table > showed data from like 2001 (or sometime around > that) but the question asked “since 2004.” Even > though it was still below 1.0, it appreciated from > 2004 to 2007 so the correct answer is that it > outperformed. Unless I’m totally stupid. > > I actually had to reread that one because I didn’t > pay enough attention to the wording the first > time. but it was compared relative to the stock index… so it was under performing for every year except for the first (the value was 1.0 for the first year). don’t remember the exact number but in any case, no number was above 1

Just checked an example in the CFAI text (pg 477 of vol 4) and Solution 2 says, “April 2001 utilities RSTR at 0.961 was higher than in the prior month…utilities outperformed finance in April.” So even though it was less than 1 it outperformed since it increased vs. the prior month and I think the question on the exam was asking if it was outperforming since 2004, when the numbers started increasing again.

cps44 I think you are wrong…go to check an example on CFAI book which is almost the same as the question.

ok now i don’t even remember the question. both the utilities and finance industry are being compared to the NYSE composite. so did the question on the exam have 2 relative strength indicators or just 1 and it was asking to compare it to the underlying equity index? if it was the former, you’re probably right

its underperforming if its less than 1 look at it this way stock return / index return 2/3–>.667 3/4–>.75 4/5–> .8 its going up but still underperforming

-1 for me. i didn’t read the cfai example that i referenced carefully and misinterpreted it. another answer that i changed from the correct answer to the incorrect answer in the final 10 minutes.

Perhaps I don’t remember this well. Does the relative strength reset annually? Let’s assume the following: 2001: 1.00 2002: 0.95 2003: 0.90 2004: 0.91 2005: 0.95 2006: 0.96 2007: 0.98 If it’s reset annually, then it underperformed in 2002-2007. If it’s never reset, then from 2004 to 2007, it was outperforming the index, even though it was underperforming since 2001. Is this wrong?

If it’s below 1, I don’t think it can outperform the index. True, the underperformance decreases because the RSI kept increasing, but it improves the absolute underperformance only. It is still underperforming the index because RSI is measured in relative terms…but, after reading all this not sure anymore…

the relative strength is the return on X divided by the return on Y. it’s a ratio. any number below 1 indicates under performance. from 2004 to 2007 X improving but still not out performing Y