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URL:  http://boards.fool.com/optimizing-blends-with-sharpegsdx-26108357.aspx

Subject:  Optimizing Blends with Sharpe/(GSD^x) Date:  11/17/2007  6:25 AM
Author:  Zeelotes Number:  203981 of 263906

In the thread The Best Measure for the Best Blend it was suggested that I try testing using a revised Sharpe/GSD. This suggestion came from JeffLandon in post # 203950 and StevnFool in # 203972. I went ahead and had this programmed into my backtester such that I can now test the following:

CAGR / (GSD^x)
CAGR / (UI^x)
CAGR / (UPI^x)
Sharpe / (GSD^x)

x can be set to any value whether positive or negative. To illustrate, let me share a little table I put together that will hopefully make this simpler for those who are a bit challenged by all this -- like me. :)
Sharpe  GSD   Ratio  Parameter x                  Consequence
1.5 17.6 0.09 Default
1.5 17.6 6.29 -0.5 GSD Underweighted
1.5 17.6 3.07 -0.25 GSD Underweighted
1.5 17.6 1.50 0 GSD Underweighted -- Equal to Sharpe Alone
1.5 17.6 0.73 0.25 GSD Underweighted
1.5 17.6 0.36 0.5 GSD Underweighted
1.5 17.6 0.17 0.75 GSD Underweighted
1.5 17.6 0.09 1 Sharpe / GSD -- No Weighting
1.5 17.6 0.04 1.25 GSD Overweighted
1.5 17.6 0.02 1.5 GSD Overweighted
1.5 17.6 0.01 1.75 GSD Overweighted
1.5 17.6 0.00 2 GSD Overweighted
1.5 17.6 0.00 2.25 GSD Overweighted
1.5 17.6 0.00 2.5 GSD Overweighted