The Motley Fool Discussion Boards

Previous Page  
Investing/Strategies / Mechanical Investing 

URL:
http://boards.fool.com/optimizingblendswithsharpegsdx26108357.aspx


Subject: Optimizing Blends with Sharpe/(GSD^x)  Date: 11/17/2007 6:25 AM  
Author: Zeelotes  Number: 203981 of 264129  
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 Of course, when GSD is underweighted that means that Sharpe is overweighted and vice versa. In the test I'm about to share I set it up with the following parameters: Begin 01/03/1999 So every year I invest in six screens  three from VL and three from SIPRO. Each screen has ranks from one to four, resulting in a blend of 24 stocks in all. The Results of the Backtest These results show that there is little to no advantage to using this formula compared to just a default of Sharpe/GSD  which is the 1.00 / 1.00 below. I'd guess the minor difference that there is isn't anything more than noise. The Parameter x on the left is the one for the Value Line screens while the one on the right is for the SIPRO sort. Parameter x Parameter x CAGR GSD Sharpe Ulcer Index An Alternative Look Just to be sure, I also did another test. Begin 01/03/1989 Parameter x CAGR GSD Sharpe Ulcer Index I don't see a mound of toast in this data, but it may be my eyes are a bit blurred at this point in the game. Let me know what the proposers think of these results. 

Copyright 19962016 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us 