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URL:  http://boards.fool.com/eric-asked-what-about-the-calculation-of-the-26126199.aspx

Subject:  Re: The Best Measure for the Best Blend Date:  11/24/2007  1:03 AM
Author:  Zeelotes Number:  204264 of 254113

Eric asked:
What about the calculation of the Sharpe of the resulting optimization? Is this the Sharpe using the monthly granularity?

No, all that I have posted to date uses daily granularity.

Do you think it makes a difference if you use daily or annual? For example, does optimization using the daily values still produce worse results if you calculate the Sharpe using daily data? Or is annual granularity better at predicting annual sharpe?

Let me share the results of some tests I did earlier this year. Unfortunately, this means that some of the methods I'm using now are not included, and some of the measures as well are not in this test, most importantly, it does not include Sharpe/GSD.

The period tested is from 1/1/1986 to 2/14/2007, so it is three years farther back in time, which does make a big difference. These results are based on holding five screens of ranks 1-4. I show the measures in both ascending and descending sort, whereas in previous tests I was only using a descending sort. As you can see, sometimes the measure works a whole lot better in ascending sort.
        Based On         Sort  Daily   Weekly  Monthly  Yearly
CAGR/GSD DESC 37.65% 37.43% 33.98% 40.37%
Sharpe DESC 37.23% 37.02% 36.90% 41.00%
Downside Deviation ASC 25.21% 27.55% 26.75% 38.57%
Treynor DESC 31.00% 37.51% 39.26% 45.81%
Beta ASC 29.09% 34.83% 35.06% 38.68%
Sortino DESC 35.47% 35.41% 32.49% 37.51%
CAGR/UPI ASC 29.44% 28.70% 28.81% 35.44%
GSD ASC 23.28% 24.31% 21.21% 29.79%
Upside Potential Ratio DESC 35.73% 33.26% 30.55% 37.51%
CAGR/SF DESC 32.36% 31.13% 32.69% 39.76%
Ulcer Index ASC 25.40% 26.22% 27.95% 36.18%
Sleep Ratio ASC 25.67% 26.03% 28.28% 36.18%
CAGR/UI DESC 31.69% 32.03% 33.45% 39.76%
Upside Potential ASC 21.00% 21.69% 21.91% 30.68%
Ulcer Performance Index DESC 30.62% 32.48% 31.75% 38.76%
Jensen ASC 31.66% 29.81% 29.95% 29.52%
Correlation DESC 27.82% 28.20% 29.84% 26.23%
Alpha DESC 34.26% 35.17% 35.39% 38.44%
Alpha ASC 28.91% 32.01% 34.16% 32.88%
Upside Potential Ratio ASC 29.61% 30.08% 30.09% 32.70%
Correlation ASC 33.69% 33.69% 34.19% 38.77%
GSD Ratio ASC 33.87% 32.55% 38.13% 27.60%
Ulcer Performance Index ASC 30.22% 30.97% 30.01% 29.03%
Jensen DESC 32.30% 32.18% 33.46% 38.44%
Sortino ASC 31.32% 29.64% 28.45% 31.22%
GSD Ratio DESC 23.30% 21.78% 22.04% 41.57%
CAGR/SF ASC 29.53% 30.60% 28.70% 27.50%
CAGR/UI ASC 30.04% 30.04% 28.39% 27.71%
CAGR/GSD ASC 27.01% 26.59% 28.22% 24.85%
Sharpe ASC 25.67% 26.56% 25.56% 26.40%
Treynor ASC 31.10% 32.27% 31.24% 32.23%
Upside Potential DESC 35.83% 33.73% 33.23% 28.81%
Beta DESC 31.70% 34.02% 33.71% 34.84%
Sleep Ratio DESC 32.51% 31.17% 32.46% 26.15%
CAGR/UPI DESC 32.52% 31.14% 28.61% 28.33%
GSD DESC 26.60% 27.22% 27.63% 26.18%
Downside Deviation DESC 30.41% 31.17% 33.02% 28.80%
Ulcer Index DESC 30.39% 28.84% 30.60% 24.74%


Based On Sort Daily Weekly Monthly Yearly
CAGR/GSD DESC 1.54 1.56 1.41 1.34
Sharpe DESC 1.48 1.47 1.39 1.45
Downside Deviation ASC 1.38 1.53 1.45 1.14
Treynor DESC 1.10 1.48 1.48 1.37
Beta ASC 1.14 1.39 1.53 1.20
Sortino DESC 1.43 1.45 1.22 1.12
CAGR/UPI ASC 1.37 1.32 1.32 1.16
GSD ASC 1.28 1.41 1.20 1.27
Upside Potential Ratio DESC 1.45 1.38 1.14 1.12
CAGR/SF DESC 1.30 1.23 1.31 1.18
Ulcer Index ASC 1.30 1.31 1.34 1.06
Sleep Ratio ASC 1.27 1.29 1.39 1.06
CAGR/UI DESC 1.26 1.22 1.30 1.18
Upside Potential ASC 1.20 1.23 1.17 1.28
Ulcer Performance Index DESC 1.21 1.23 1.24 1.11
Jensen ASC 1.16 1.09 1.10 1.08
Correlation DESC 1.07 1.07 1.13 1.04
Alpha DESC 0.99 1.01 1.03 1.10
Alpha ASC 1.02 1.04 1.08 0.98
Upside Potential Ratio ASC 1.06 1.01 1.03 0.98
Correlation ASC 0.96 0.96 0.98 1.11
GSD Ratio ASC 1.02 1.02 1.23 0.70
Ulcer Performance Index ASC 1.00 1.02 1.00 0.89
Jensen DESC 0.93 0.92 0.97 1.08
Sortino ASC 1.00 0.98 0.95 0.95
GSD Ratio DESC 0.86 0.85 0.79 1.29
CAGR/SF ASC 0.98 1.00 0.96 0.85
CAGR/UI ASC 0.99 0.99 0.94 0.86
CAGR/GSD ASC 0.95 0.93 0.98 0.89
Sharpe ASC 0.91 0.93 0.90 0.94
Treynor ASC 0.86 0.89 0.89 1.02
Upside Potential DESC 0.90 0.88 0.87 0.84
Beta DESC 0.82 0.86 0.85 0.89
Sleep Ratio DESC 0.90 0.87 0.95 0.64
CAGR/UPI DESC 0.88 0.84 0.85 0.70
GSD DESC 0.79 0.78 0.84 0.81
Downside Deviation DESC 0.81 0.83 0.85 0.71
Ulcer Index DESC 0.85 0.81 0.89 0.61


Based On Sort Daily Weekly Monthly Yearly
CAGR/GSD DESC 20.50 20.06 20.37 26.77
Sharpe DESC 21.34 21.32 22.82 24.60
Downside Deviation ASC 14.28 14.21 14.58 31.88
Treynor DESC 24.87 21.65 22.66 30.42
Beta ASC 21.86 20.62 18.95 29.65
Sortino DESC 21.06 20.63 23.11 31.56
CAGR/UPI ASC 17.71 17.92 18.01 27.72
GSD ASC 14.08 13.38 13.43 19.79
Upside Potential Ratio DESC 20.79 20.25 23.49 31.56
CAGR/SF DESC 21.23 21.64 21.14 31.21
Ulcer Index ASC 15.68 16.08 16.99 32.60
Sleep Ratio ASC 16.17 16.18 16.46 32.60
CAGR/UI DESC 21.56 22.45 21.97 31.21
Upside Potential ASC 13.31 13.52 14.49 20.15
Ulcer Performance Index DESC 21.63 22.70 21.89 33.13
Jensen ASC 23.40 23.47 23.64 23.58
Correlation DESC 22.60 22.97 23.01 21.46
Alpha DESC 33.63 33.66 33.24 33.50
Alpha ASC 25.28 27.64 28.82 31.77
Upside Potential Ratio ASC 24.13 26.78 26.02 28.91
Correlation ASC 34.19 34.10 33.71 33.05
GSD Ratio ASC 31.80 29.78 28.07 31.94
Ulcer Performance Index ASC 27.50 27.75 27.16 28.08
Jensen DESC 34.09 34.38 33.69 34.70
Sortino ASC 28.83 27.52 27.15 28.33
GSD Ratio DESC 23.81 21.77 24.61 29.31
CAGR/SF ASC 27.42 27.89 27.31 27.19
CAGR/UI ASC 27.92 27.92 27.45 27.14
CAGR/GSD ASC 25.62 25.81 26.06 24.21
Sharpe ASC 24.93 25.31 25.19 24.39
Treynor ASC 37.44 36.88 35.22 29.61
Upside Potential DESC 42.52 40.31 40.04 34.42
Beta DESC 42.29 43.34 43.64 42.18
Sleep Ratio DESC 36.06 36.29 33.08 32.90
CAGR/UPI DESC 37.97 38.42 33.07 31.71
GSD DESC 33.31 35.56 32.31 31.45
Downside Deviation DESC 40.01 39.55 42.01 32.94
Ulcer Index DESC 36.50 36.27 33.47 31.83

This is the same as above, but in this case the date range tested is 1/1/1999 to 2/14/2007. The reason for this is that both SIPRO and VL screens are used. There are times, therefore, that SI screens alone are chosen for a particular year.
        Based On         Sort  Daily   Weekly  Monthly  Yearly
CAGR/GSD DESC 48.89% 47.19% 48.37% 42.84%
Sharpe DESC 45.96% 47.02% 44.36% 48.50%
Downside Deviation ASC 28.57% 29.12% 29.49% 51.85%
Treynor DESC 50.27% 52.37% 44.38% 49.21%
Beta ASC 47.29% 46.21% 63.43% 54.08%
Sortino DESC 47.78% 55.25% 54.46% 50.82%
CAGR/UPI ASC 41.97% 39.40% 33.26% 53.59%
GSD ASC 25.92% 29.68% 27.82% 31.32%
Upside Potential Ratio DESC 57.66% 54.61% 52.62% 50.82%
CAGR/SF DESC 40.35% 45.65% 48.81% 57.49%
Ulcer Index ASC 37.67% 34.54% 36.66% 37.87%
Sleep Ratio ASC 33.84% 34.15% 39.46% 37.87%
CAGR/UI DESC 41.62% 48.46% 48.66% 57.49%
Upside Potential ASC 27.27% 29.81% 26.92% 30.66%
Ulcer Performance Index DESC 46.78% 46.40% 48.66% 58.33%
Jensen ASC 35.11% 34.20% 32.07% 36.97%
Correlation DESC 33.76% 34.21% 30.33% 30.10%
Alpha DESC 49.08% 49.54% 49.39% 50.75%
Alpha ASC 34.53% 34.12% 32.97% 39.44%
Upside Potential Ratio ASC 26.60% 32.81% 33.89% 33.07%
Correlation ASC 37.17% 37.17% 37.16% 36.05%
GSD Ratio ASC 37.28% 32.28% 35.94% 40.89%
Ulcer Performance Index ASC 34.69% 33.01% 38.39% 29.50%
Jensen DESC 47.39% 49.67% 47.53% 47.75%
Sortino ASC 29.13% 30.85% 32.65% 29.25%
GSD Ratio DESC 39.54% 44.78% 38.13% 63.06%
CAGR/SF ASC 33.58% 35.74% 36.60% 26.48%
CAGR/UI ASC 38.54% 35.16% 34.43% 26.69%
CAGR/GSD ASC 27.16% 27.25% 34.74% 24.33%
Sharpe ASC 28.02% 28.72% 26.04% 23.71%
Treynor ASC 35.31% 40.89% 47.24% 30.65%
Upside Potential DESC 47.59% 41.72% 40.06% 45.15%
Beta DESC 22.40% 33.79% 40.93% 39.33%
Sleep Ratio DESC 33.49% 34.81% 36.36% 31.44%
CAGR/UPI DESC 32.87% 31.80% 34.33% 35.07%
GSD DESC 49.96% 44.64% 34.60% 32.20%
Downside Deviation DESC 54.45% 34.49% 46.78% 38.47%
Ulcer Index DESC 25.78% 25.80% 27.15% 30.62%


Based On Sort Daily Weekly Monthly Yearly
CAGR/GSD DESC 2.18 2.07 2.01 1.51
Sharpe DESC 2.05 1.97 1.83 1.79
Downside Deviation ASC 1.69 1.77 1.54 1.63
Treynor DESC 1.71 2.13 1.87 1.71
Beta ASC 1.70 2.01 2.13 1.68
Sortino DESC 2.13 2.27 2.13 1.60
CAGR/UPI ASC 1.94 1.83 1.62 1.98
GSD ASC 1.56 1.74 1.63 1.57
Upside Potential Ratio DESC 2.41 2.37 1.96 1.60
CAGR/SF DESC 1.71 1.83 1.96 1.96
Ulcer Index ASC 1.96 1.82 1.71 1.31
Sleep Ratio ASC 1.86 1.81 1.79 1.31
CAGR/UI DESC 1.81 1.98 1.98 1.96
Upside Potential ASC 1.71 1.77 1.68 1.65
Ulcer Performance Index DESC 1.94 1.90 1.98 1.87
Jensen ASC 1.69 1.57 1.47 1.61
Correlation DESC 1.44 1.49 1.30 1.28
Alpha DESC 1.39 1.43 1.44 1.56
Alpha ASC 1.46 1.41 1.36 1.26
Upside Potential Ratio ASC 1.16 1.30 1.34 1.41
Correlation ASC 1.26 1.26 1.28 1.24
GSD Ratio ASC 1.20 1.08 1.07 1.45
Ulcer Performance Index ASC 1.40 1.35 1.45 1.27
Jensen DESC 1.36 1.43 1.39 1.48
Sortino ASC 1.16 1.23 1.30 1.24
GSD Ratio DESC 1.56 1.87 1.57 2.10
CAGR/SF ASC 1.32 1.37 1.38 1.15
CAGR/UI ASC 1.45 1.35 1.33 1.17
CAGR/GSD ASC 1.11 1.09 1.33 1.08
Sharpe ASC 1.23 1.28 1.22 1.06
Treynor ASC 1.15 1.28 1.42 1.14
Upside Potential DESC 1.27 1.15 1.09 1.40
Beta DESC 0.75 0.95 1.16 1.10
Sleep Ratio DESC 1.01 1.04 1.13 1.20
CAGR/UPI DESC 1.00 0.96 1.13 1.36
GSD DESC 1.48 1.26 1.09 1.01
Downside Deviation DESC 1.40 0.95 1.20 1.27
Ulcer Index DESC 0.82 0.82 0.92 1.17


Based On Sort Daily Weekly Monthly Yearly
CAGR/GSD DESC 19.02 19.42 20.76 26.08
Sharpe DESC 19.14 20.57 21.21 23.84
Downside Deviation ASC 14.28 13.81 16.26 29.11
Treynor DESC 26.14 20.97 20.62 25.85
Beta ASC 24.68 19.74 25.40 29.19
Sortino DESC 19.03 20.46 21.75 29.27
CAGR/UPI ASC 18.65 18.68 17.80 23.49
GSD ASC 13.98 14.40 14.43 17.23
Upside Potential Ratio DESC 19.93 19.22 23.25 29.27
CAGR/SF DESC 20.73 21.92 21.55 25.47
Ulcer Index ASC 16.32 16.17 18.65 27.24
Sleep Ratio ASC 15.47 16.08 19.07 27.24
CAGR/UI DESC 20.01 21.12 21.15 25.47
Upside Potential ASC 13.34 14.16 13.44 15.97
Ulcer Performance Index DESC 20.89 21.23 21.15 27.61
Jensen ASC 18.02 19.18 19.32 20.35
Correlation DESC 20.97 20.39 21.12 21.26
Alpha DESC 34.06 33.22 32.64 30.10
Alpha ASC 21.13 21.88 21.93 30.42
Upside Potential Ratio ASC 20.85 23.20 23.19 21.02
Correlation ASC 28.18 28.18 27.64 27.87
GSD Ratio ASC 30.22 29.31 34.31 25.75
Ulcer Performance Index ASC 22.56 22.22 24.20 21.05
Jensen DESC 33.84 33.37 33.11 30.32
Sortino ASC 23.28 23.14 23.05 21.56
GSD Ratio DESC 22.84 20.70 21.61 25.75
CAGR/SF ASC 23.47 23.93 24.47 20.81
CAGR/UI ASC 24.45 23.92 24.01 20.71
CAGR/GSD ASC 22.70 23.40 24.25 20.45
Sharpe ASC 20.65 20.17 18.96 20.23
Treynor ASC 29.95 30.92 31.61 25.67
Upside Potential DESC 37.37 37.19 38.40 30.79
Beta DESC 31.55 38.46 35.64 37.00
Sleep Ratio DESC 34.34 34.40 32.10 24.27
CAGR/UPI DESC 34.08 34.90 30.07 23.33
GSD DESC 31.68 34.92 31.47 32.61
Downside Deviation DESC 38.21 39.62 40.19 29.05
Ulcer Index DESC 33.52 33.21 29.64 24.20

So in answer to your questions regarding the Sharpe as the basis for screen selection, based on these tests alone, it is optimal to use yearly granularity for the highest CAGR, daily granularity for the highest Sharpe, and daily/weekly for the lowest GSD. This is for the VL only test. When it comes to the test of VL-SI, the highest CAGR is obtained with yearly again, and daily data gets the best Sharpe and lowest GSD. When it comes to Sharpe it is optimal to use daily granularity, but keep in mind, that is not true for other measures.

Take note of the highest CAGR measures:
Sharpe DESC Yearly at 41.00%
Treynor DESC Yearly at 45.81%
GSD Ratio DESC Yearly at 41.57%

The highest Sharpe measures:
CAGR/GSD DESC Daily and Weekly at 1.54 / 1.56
Downside Deviation ASC Weekly at 1.53
Beta ASC Monthly at 1.53

The lowest GSD measures:
Upside Potential ASC Daily at 13.31
GSD ASC Weekly and Monthly at 13.38 / 13.43

When it comes to the VL-SIPRO universes combined from 1999:

Take note of the highest CAGR measures:
Beta ASC Monthly at 63.43%
GSD Ratio DESC Yearly at 63.06%
UPI DESC Yearly at 58.33%

The highest Sharpe measures:
Sortino DESC Weekly at 2.27
UPR DESC Daily at 2.41
UPR DESC Weekly at 2.37

The lowest GSD measures:
Upside Potential ASC Daily and Monthly at 13.34 / 13.44
Downside Deviation ASC Weekly at 13.81

So it appears that GSD has been replaced by other measures as the best predictors of future low GSD.
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