Unless otherwise noted, all descriptive statistics found on this page are based on a daily return frequency. The following table provides you with basic risk and return statistics for the S&P 500 Unleveraged Equally Weighted Strategy, the S&P 500 Unleveraged Sector Rotation Strategy, and the S&P 500 Price Index. | |||
GRD Advisors Ltd: U.S. Strategy Descriptive Statistics | |||
November 1, 2011 - July 7, 2017 | |||
Descriptive Statistic | S&P 500 Equally Weighted Unleveraged Alpha Strategy | S&P 500 Unleveraged Sector Rotation Strategy | S&P 500 Price Index |
Mean Daily Return | 0.03% | 0.11% | 0.05% |
Annualized Return (N = 365) | 12.22% | 40.25% | 18.81% |
Standard Deviation (σ) (N = 365) | 3.90% | 12.37% | 15.55% |
Signal-to-Noise Ratio (SNR) | 3.13 | 3.25 | 1.21 |
Beta | 0.06 | 0.18 | 1.00 |
Pearson Correlation | 0.25 | 0.23 | 1.00 |
Strategy Objectives Assessment & Incremental Benefit | |||
November 1, 2011 - April 13, 2017 | |||
Objective | S&P 500 Equally Weighted Unleveraged Alpha Strategy | S&P 500 Unleveraged Sector Rotation Strategy | S&P 500 Price Index |
Return Distribution Charts | |||
Strategy SNR > S&P 500 SNR | 3.45 | 3.51 | 1.17 |
Strategy Daily σ < S&P 500 Price Index σ | 0.20% | 0.65% | 0.83% |
Portfolio Skew | 1.16 | 0.48 | (0.15) |
Average Positive Returns vs. |Average Negative Returns| | 0.16% vs. 0.12% | 0.54% vs. 0.42% | 0.62% vs. 0.60% |
Normal Probability Mass > 0% | 57.23% | 57.27% | 52.46% |
Empirical Probability Mass > 0% | 54.89% | 54.89% | 53.43% |
Incremental Benefit | |||
Objective | S&P 500 Equally Weighted Unleveraged Alpha Strategy | S&P 500 Unleveraged Sector Rotation Strategy | S&P 500 Price Index |
Excess Signal-to-Noise Ratio vs. S&P 500 Price Index SNR (Annualized) | 2.28 | 2.34 | - |
Reduction in Standard Deviation vs. S&P 500 Price Index (Daily) | (0.622%) | (0.176%) | - |
Reduction in Standard Deviation vs. S&P 500 Price Index (Annualized | N = 365) | (11.883%) | (3.362%) | - |
Excess Positive Skew vs. S&P 500 Price Index (Daily) | 1.309 | 0.632 | - |
Excess Average Positive Returns (Strategy | Daily) | 0.037% | 0.112% | - |
Excess Normal Mass > 0% vs. S&P 500 Price (Daily) | 4.767% | 4.810% | - |
Excess Empirical Mass > 0% vs. S&P 500 Price Index (Daily) | 1.460% | 1.460% | - |
GRD Advisors Ltd: Quarterly Signal-to-Noise Ratio | |||
January 2012 - March 2017 | |||
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GRD Advisors Ltd: Quarterly Holding Period Returns (HPR) | |||
January 2012 - March 2017 | |||
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Holding Period Statistics | |||
Ending July 7, 2017 | |||
Holding Period | S&P 500 Equally Weighted Unleveraged Alpha Strategy | S&P 500 Unleveraged Sector Rotation Strategy | S&P 500 Price Index |
Weekly Holding Period Return | -0.07% | -0.15% | 0.07% |
MTD Holding Period Return | -0.07% | -0.15% | 0.07% |
YTD Holding Period Return | -0.24% | 0.45% | 8.32% |
1YR Holding Period Return | 1.55% | 5.51% | 15.60% |
2YR Holding Period Return | 15.48% | 66.86% | 18.49% |
3YR Holding Period Return | 25.07% | 117.34% | 23.50% |
4YR Holding Period Return | 35.56% | 179.53% | 47.84% |
5YR Holding Period Return | 49.22% | 277.82% | 76.50% |
Since Inception HPR | 60.78% | 368.28% | 99.07% |
Ex-Post Total Risk (Standard Deviation) | |||
Ending July 7, 2017 | |||
Descriptive Statistic | S&P 500 Equally Weighted Unleveraged Alpha Strategy | S&P 500 Unleveraged Sector Rotation Strategy | S&P 500 Price Index |
Weekly Standard Deviation | 1.36% | 4.67% | 12.87% |
Monthly Standard Deviation | 1.36% | 4.67% | 12.87% |
YTD Standard Deviation | 2.46% | 7.88% | 8.55% |
1 Year Standard Deviation | 2.58% | 8.67% | 9.88% |
2 Year Standard Deviation | 3.60% | 12.80% | 16.14% |
3 Year Standard Deviation | 3.52% | 12.22% | 15.66% |
4 Year Standard Deviation | 3.57% | 11.74% | 14.89% |
5 Year Standard Deviation | 3.69% | 12.07% | 14.83% |
Since Inception Standard Deviation | 3.90% | 12.37% | 15.55% |
Ex-Post Market Risk (Beta vs. S&P 500 Price Index) | |||
Ending July 7, 2017 | |||
Descriptive Statistic | S&P 500 Equally Weighted Unleveraged Alpha Strategy | S&P 500 Unleveraged Sector Rotation Strategy | S&P 500 Price Index |
Weekly Beta | 0.07 | 0.21 | 1.00 |
Monthly Beta | 0.07 | 0.21 | 1.00 |
YTD Beta | 0.03 | 0.10 | 1.00 |
1 Year Beta | 0.08 | 0.30 | 1.00 |
2 Year Beta | 0.05 | 0.16 | 1.00 |
3 Year Beta | 0.05 | 0.16 | 1.00 |
4 Year Beta | 0.05 | 0.17 | 1.00 |
5 Year Beta | 0.05 | 0.16 | 1.00 |
Since Inception Beta | 0.06 | 0.18 | 1.00 |
Ex-Post Pearson Correlation | |||
Ending July 7, 2017 | |||
Descriptive Statistic | S&P 500 Equally Weighted Unleveraged Alpha Strategy | S&P 500 Unleveraged Sector Rotation Strategy | S&P 500 Price Index |
Weekly Pearson Correlation | 0.64 | 0.57 | 1.00 |
Monthly Pearson Correlation | 0.64 | 0.57 | 1.00 |
YTD Pearson Correlation | 0.12 | 0.11 | 1.00 |
1 Year Pearson Correlation | 0.30 | 0.34 | 1.00 |
2 Year Pearson Correlation | 0.22 | 0.20 | 1.00 |
3 Year Pearson Correlation | 0.21 | 0.21 | 1.00 |
4 Year Pearson Correlation | 0.21 | 0.22 | 1.00 |
5 Year Pearson Correlation | 0.20 | 0.19 | 1.00 |
Since Inception Pearson Correlation | 0.25 | 0.23 | 1.00 |
It is recommended that you review the main Member Section page to gain an understanding of the underlying investment framework applied to the development of our investment strategies. All of the strategies found utilize our proprietary measures to identify highly asymmetrical payoff structures at the sector level. We have prepared a brief video series to walk you through the basic application of our underlying research and the conditional states that form our long or short positions. The underlying decision rules for each strategy are predefined and systematic in nature, which allows us to adhere to an evidence based investment approach. | ||
To receive notification of conditional and unconditional trades for the following trading day, use the “subscribe to blog via email“ feature found on the website. This will allow you to follow trade decisions on a forward basis, rather than merely relying on historical information to validate the stated statistics. | ||
The companies included in each Select Sector Index are selected on the basis of general industry classification from a universe of companies defined by the Standard & Poor’s 500 Composite Stock®Index (“S&P 500®“). The nine Select Sector Indexes (each a “Select Sector Index”) upon which the Select Sector SPDR Funds are based together comprise all of the companies in the S&P 500. Both strategies utilize the following exchange traded funds to gain access to the S&P 500 equity sectors: | ||
ETF Name | Description | |
Energy Select Sector SPDR® Fund (XLE) | The Energy Select Sector Index includes companies from the following industries: oil, gas & consumable fuels and energy equipment & services. | |
Materials Select Sector SPDR® Fund (XLB) | The Materials Select Sector Index includes companies from the following industries: chemicals; metals & mining; paper & forest products; containers & packaging; and construction materials. | |
Industrial Select Sector SPDR® Fund (XLI) | The Industrial Select Sector Index includes companies from the following industries: industrial conglomerates; aerospace & defense; machinery; air freight & logistics; road & rail; commercial services & supplies; electrical equipment; construction & engineering; building products; airlines; and trading companies & distributors. | |
Consumer Discretionary Select Sector SPDR® Fund (XLY) | The Consumer Discretionary Select Sector Index includes companies from the following industries: retail (specialty, multi-line, internet and catalog); media; hotels, restaurants & leisure; household durables; textiles, apparel & luxury goods; automobiles, auto components and distributors; leisure equipment & products; and diversified consumer services. | |
Consumer Staples Select Sector SPDR® Fund (XLP) | The Consumer Staples Select Sector Index includes companies from the following industries: food & staples retailing; household products; food products; beverages; tobacco; and personal products. | |
Health Care Select Sector SPDR® Fund (XLV) | The Health Care Select Sector Index includes companies from the following industries: pharmaceuticals; health care providers & services; health care equipment & supplies; biotechnology; life sciences tools & services; and health care technology. | |
Financial Select Sector SPDR® Fund (XLF) | The Financial Select Sector Index includes companies from the following industries: diversified financial services; insurance; commercial banks; capital markets; real estate investment trusts (“REITs”); thrift & mortgage finance; consumer finance; and real estate management & development. | |
Technology Select Sector SPDR® Fund (XLK) | The Technology Select Sector Index includes companies from the following industries: computers & peripherals; software; diversified telecommunication services; communications equipment; semiconductor & semiconductor equipment; internet software & services; IT services; wireless telecommunication services; electronic equipment & instruments; and office electronics. | |
Utilities Select Sector SPDR® Fund (XLU) | The Utilities Select Sector Index includes companies from the following industries: electric utilities; multi-utilities; independent power producers & energy traders; and gas utilities. | |
These sector ETFs provide investors with sufficient liquidity to minimize price impact and reduce liquidity risk. | |||||||||
SPDR ETF 90 Day Average Dollar Volume (Millions) | GRD Advisors Ltd: Global Strategy Descriptive Statistics | GRD Advisors Ltd: Global Strategy Descriptive Statistics | |||||||
Methodology | XLE | XLB | XLI | XLY | XLP | XLV | XLF | XLK | XLU |
Closing (A) | $1,031.9 | $227.1 | $621.7 | $403.2 | $660.1 | $624.6 | $1,150.6 | $409.5 | $768.8 |
H-L-C (B) | $1,031.5 | $227.2 | $621.7 | $403.2 | $660.2 | $624.6 | $1,150.3 | $409.4 | $768.7 |
* For the 90-day period ending October 31, 2016. | (A) 90-Day Average Dollar Volume = Average of the (Closing Price x Volume) for the past 90 trading days. | (B) 90-Day Average Dollar Volume = Average of [ (Average of the daily high, low, and close) x Volume ] for the past 90 trading days. |
S&P 500 Unleveraged Sector Rotation Strategy |
The S&P 500 Unleveraged Sector Rotation Strategy utilizes the trade level decisions derived from our underlying research to construct a portfolio that allocates capital evenly across trade decisions. The strategy relies more heavily on the market timing ability of the underlying research to generate returns and carries less total (volatility) and market (Beta) risk than the market portfolio (S&P 500 Price Index), but more total and market risk then its sister strategy, the S&P 500 Equally Weighted Unleveraged Alpha Strategy. The Signal-to-Noise Ratio (SNR) is the main determinant of strategy success and the strategy seeks to provide incremental risk-adjusted returns to the investor. We prefer the use of the SNR, as the risk free rate incorporated in the Sharpe Ratio often differs across investment firms and this may lead to incorrect assumptions when comparing risk-adjusted performance. In addition, the risk free rate may be viewed as a constant value within the Sharpe Ratio and removing it from the formula produces more accurate comparables for risk adjusted performance. |
The strategy utilizes the State Street Global Advisors SPDR ETFs to gain exposure to each of the S&P 500 Price Index equity sectors. The SPDR sector funds combine the Information Technology and Telecommunication Sectors, which reduces the total number of sectors to nine (The Real Estate Sector is excluded). |
S&P 500 Equally Weighted Unleveraged Alpha Strategy |
The S&P 500 Equally Weighted Unleveraged Alpha Strategy utilizes the trade level decisions derived from our underlying research and constructs a portfolio across nine equity sectors and cash. The portfolio construction methodology for the S&P 500 Equally Weighted Unleveraged Alpha Strategy differs from the S&P 500 Unleveraged Sector Rotation Strategy, as it incorporates cash as an alternative asset class to manage total and market risk. At all times, this portfolio allocates capital at a 1/9th proportion and should the underlying trade decision call for no exposure to a sector, the 1/9th proportion is invested in cash or cash equivalents. It should be noted, that we do not incorporate the performance of the cash portion of the strategy and this may be viewed as providing a small incremental benefit when the strategy allocates portions of the portfolio to cash holdings. |
The strategy utilizes the State Street Global Advisors SPDR ETFs to gain exposure to each of the S&P 500 sectors. The SPDR sector funds combine the Information Technology and Telecommunication Sectors, which reduces the total number of sectors to nine (The Real Estate Sector is excluded). |
U.S. Equity Strategy Objectives |
Achieve an ex-post Signal-to-Noise Ratio (SNR) that is superior to the market portfolio. |
This is achieved by delivering a positive average daily rate of return and maintaining a daily standard deviation level that is less than the market portfolio. You should note that no explicit rate of return objective is stated, as the SNR is the primary objective, and it is hypothesized that by delivering a positive daily rate of return, combined with maintaining a consistent level of total risk (σ), a consistent and superior SNR will result. |
Achieve an asymmetrical return distribution. |
Success is determined by delivering a return distribution with positive portfolio skew. A positive skew implies that estimating returns using the first two moments of the return distribution will be incorrect. It further implies that the return distribution will have a greater percentage of its probability mass in the right tail of the return distribution. In short, you will achieve a return that is greater than that estimated by the first two moments of the return distribution (µ, σ). Within this context, the strategy will deliver a greater percentage of returns that are abnormal in nature, are greater than two standard deviations from the mean return, and provide investors with meaningful upside return potential. |
Success is also determined by delivering a return distribution where the Average Positive Daily Returns is greater than the absolute value of Average Negative Daily Returns and more than 50% of the cumulative probability mass is greater than 0%. |
The return distribution for the S&P 500 Price Index is presented within the Strategy Objectives Assessment & Incremental Benefit section of this page and the reader should make note of the increased level of volatility, the increased level of tail risk (left tail), and the inferior SNR that results. It is important to note that when referring to the increased level of tail risk, both the probability mass greater than two standard deviations is analyzed, along with the distance between observations found in the left tail of the distribution. One of the shortcomings of utilizing the standard normal distribution is that returns are assumed to be continuous in nature, when in reality, the distribution more closely follows a discrete process. As the goal is to move away from theoretical bodies of work and develop a strategy that performs well in the real world, we prefer to use the student distribution rather than the log-normal (or lognormal) distribution and focus on the discrete nature of returns. After all, we operate within the real world, not a theoretical world! |
The S&P 500 Unleveraged Sector Rotation Strategy is a risk-based strategy that targets conditional market states and maintains a consistent level of total and market risk. The strategy’s long/short structure is ideal for both risk-targeting and return generation, assuming that correct underlying decisions are formed. Strategy success relies on the strength of the underlying proprietary measures for market timing and on the portfolio construction methodologies. I have also included the return distribution for the S&P 500 Equally Weighted Unleveraged Alpha Strategy below. Make note of how all primary objectives have been achieved under different risk and return dynamics. |
The main drivers for maintaining low levels of market and total risk are the low levels of correlation between sectors. This is achieved by superior market timing abilities and maintaining sector exposure for limited periods of time, thereby reducing volatility levels and beta coefficients. These periods have been identified as providing highly asymmetrical payoff structures and positions are closed once these structures have dissipated. | |||||||||
The following correlation matrices will provide you with the daily Pearson Correlation coefficients between each of the nine sectors. | |||||||||
GRD Advisors Ltd: U.S. Strategy Equity Sector Correlation Matrix | GRD Advisors Ltd: Global Strategy Descriptive Statistics | GRD Advisors Ltd: Global Strategy Descriptive Statistics | |||||||
November 1, 2011 - June 23, 2017 (Since Inception) | |||||||||
Equity Sector ETF | XLE | XLB | XLI | XLY | XLP | XLV | XLF | XLK | XLU |
Energy Select Sector SPDR® Fund | 1.00 | 0.04 | 0.12 | 0.05 | -0.01 | 0.06 | 0.23 | -0.01 | 0.04 |
Materials Select Sector SPDR® Fund | 0.04 | 1.00 | 0.18 | 0.15 | 0.05 | 0.14 | 0.11 | 0.11 | 0.07 |
Industrial Select Sector SPDR® Fund | 0.12 | 0.18 | 1.00 | 0.31 | -0.04 | 0.09 | 0.16 | 0.20 | 0.05 |
Discretionary Select Sector SPDR® Fund | 0.05 | 0.15 | 0.31 | 1.00 | 0.09 | 0.08 | 0.04 | 0.11 | 0.01 |
Staples Select Sector SPDR® Fund | -0.01 | 0.05 | -0.04 | 0.09 | 1.00 | -0.03 | 0.03 | 0.05 | 0.19 |
Health Care Select Sector SPDR® Fund | 0.06 | 0.14 | 0.09 | 0.08 | -0.03 | 1.00 | 0.19 | -0.01 | 0.10 |
Financial Select Sector SPDR® Fund | 0.23 | 0.11 | 0.16 | 0.04 | 0.03 | 0.19 | 1.00 | 0.06 | 0.03 |
Technology Select Sector SPDR® Fund | -0.01 | 0.11 | 0.20 | 0.11 | 0.05 | -0.01 | 0.06 | 1.00 | 0.02 |
Utilities Select Sector SPDR® Fund | 0.04 | 0.07 | 0.05 | 0.01 | 0.19 | 0.10 | 0.03 | 0.02 | 1.00 |
June 24, 2016 - June 23, 2017 (252 Trading Days) | |||||||||
Equity Sector ETF | XLE | XLB | XLI | XLY | XLP | XLV | XLF | XLK | XLU |
Energy Select Sector SPDR® Fund | 1.00 | 0.00 | -0.02 | 0.01 | 0.05 | -0.01 | 0.14 | -0.19 | 0.05 |
Materials Select Sector SPDR® Fund | 0.00 | 1.00 | 0.49 | 0.09 | -0.16 | 0.05 | 0.00 | 0.09 | 0.08 |
Industrial Select Sector SPDR® Fund | -0.02 | 0.49 | 1.00 | 0.19 | -0.22 | 0.06 | -0.02 | 0.19 | 0.05 |
Discretionary Select Sector SPDR® Fund | 0.01 | 0.09 | 0.19 | 1.00 | 0.11 | 0.01 | 0.02 | -0.01 | 0.02 |
Staples Select Sector SPDR® Fund | 0.05 | -0.16 | -0.22 | 0.11 | 1.00 | -0.17 | -0.05 | -0.16 | 0.02 |
Health Care Select Sector SPDR® Fund | -0.01 | 0.05 | 0.06 | 0.01 | -0.17 | 1.00 | 0.13 | 0.12 | -0.07 |
Financial Select Sector SPDR® Fund | 0.14 | 0.00 | -0.02 | 0.02 | -0.05 | 0.13 | 1.00 | 0.01 | 0.07 |
Technology Select Sector SPDR® Fund | -0.19 | 0.09 | 0.19 | -0.01 | -0.16 | 0.12 | 0.01 | 1.00 | -0.04 |
Utilities Select Sector SPDR® Fund | 0.05 | 0.08 | 0.05 | 0.02 | 0.02 | -0.07 | 0.07 | -0.04 | 1.00 |
The main drivers for maintaining low levels of market and total risk are the low levels of correlation between sectors. This is achieved by superior market timing abilities and maintaining sector exposure for limited periods of time, thereby reducing volatility levels and beta coefficients. These periods have been identified as providing highly asymmetrical payoff structures and positions are closed once these structures have dissipated. | Descriptive Statistic | Descriptive Statistic | Descriptive Statistic | Descriptive Statistic | Descriptive Statistic | Descriptive Statistic | Descriptive Statistic | Descriptive Statistic | Descriptive Statistic | Descriptive Statistic | Descriptive Statistic | Descriptive Statistic | Descriptive Statistic | Descriptive Statistic | Descriptive Statistic | Descriptive Statistic | Descriptive Statistic | Descriptive Statistic |
The following table will provide you with the holding period statistics for each of the nine sectors. | ||||||||||||||||||
GRD Advisors Ltd: U.S. Strategy Holding Period Duration | GRD Advisors Ltd: U.S. Strategy Holding Period Duration | GRD Advisors Ltd: U.S. Strategy Holding Period Duration | GRD Advisors Ltd: U.S. Strategy Holding Period Duration | GRD Advisors Ltd: U.S. Strategy Holding Period Duration | GRD Advisors Ltd: U.S. Strategy Holding Period Duration | GRD Advisors Ltd: U.S. Strategy Holding Period Duration | GRD Advisors Ltd: U.S. Strategy Holding Period Duration | GRD Advisors Ltd: U.S. Strategy Holding Period Duration | GRD Advisors Ltd: U.S. Strategy Holding Period Duration | GRD Advisors Ltd: U.S. Strategy Holding Period Duration | GRD Advisors Ltd: U.S. Strategy Holding Period Duration | GRD Advisors Ltd: U.S. Strategy Holding Period Duration | ||||||
For the period November 1, 2011 - January 6, 2017 | ||||||||||||||||||
Descriptive Statistic | XLE | XLB | XLI | XLY | XLP | XLV | XLF | XLK | XLU | |||||||||
L | S | L | S | L | S | L | S | L | S | L | S | L | S | L | S | L | S | |
Mean Holding Period (Days) | 5 | 3 | 6 | 3 | 7 | 3 | 8 | 3 | 15 | 6 | 6 | 5 | 4 | 3 | 8 | 5 | 6 | 3 |
Standard Deviation (Days) | 2 | 2 | 5 | 3 | 6 | 2 | 7 | 2 | 14 | 4 | 6 | 3 | 3 | 2 | 6 | 4 | 4 | 2 |
Minimum Holding Period | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
Maximum Holding Period | 9 | 6 | 19 | 14 | 26 | 14 | 28 | 13 | 50 | 14 | 28 | 12 | 10 | 6 | 18 | 15 | 13 | 7 |
Number of Trades | 22 | 24 | 41 | 35 | 36 | 43 | 51 | 44 | 28 | 37 | 60 | 24 | 29 | 27 | 28 | 33 | 31 | 20 |
On a gross position basis (Long + Short), the strategies have averaged 2.8 holdings per day and 1.1 holdings on a net position basis (absolute value of Long - Short). |
*No relationship exists between GRD Advisors Ltd. and State Street Global Advisors or their affiliated companies. The goal is to utilize a liquid index fund that minimizes tracking error with the underlying sectors. Institutional investors may also choose to hold the individual securities that comprise the cap-weighted sectors. |
Important Disclaimer: I am not licensed with any regulatory body in any capacity. This document is for information and illustrative purposes only and does not purport to show actual results. It is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action. Opinions expressed herein are current opinions as of the date appearing in this material only and are subject to change without notice. Reasonable people may disagree about the opinions expressed herein. In the event any of the assumptions used herein do not prove to be true, results are likely to vary substantially. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate its ability to invest for a long term especially during periods of a market downturn. No representation is being made that any account, product, or strategy will or is likely to achieve profits, losses, or results similar to those discussed, if any. No part of this document may be reproduced in any manner, in whole or in part, without the prior written permission of GRD Advisors Ltd.. This information is provided with the understanding that with respect to the material provided herein, that you will make your own independent decision with respect to any course of action in connection herewith and as to whether such course of action is appropriate or proper based on your own judgment, and that you are capable of understanding and assessing the merits of a course of action. GRD Advisors Ltd. shall not have any liability for any damages of any kind whatsoever relating to this material. You should consult your advisors with respect to these areas. By accepting this material, you acknowledge, understand and accept the foregoing. |