The Motley Fool Discussion Boards
Investing/Strategies / Mechanical Investing
|Subject: Re: Blending at a Whole New Level||Date: 7/23/2008 10:28 PM|
|Author: Zeelotes||Number: 211443 of 256108|
Let me try to help you, here. I may not be representative of even a small minority, but here goes.
First off, Steve, this is raw research. It is a work in process. I don't expect the vast majority of board members to say much about it since they don't have the tools or experience to contribute anything value-added. But there are some who can make contributions... my comments were addressed to them. The ones having the ability to assist with bringing this to a higher level.
You seem to assume that I have a regularly updated database of all (100?) VL screens from which I can calculate Treynor/Alpha/Calmar/Jensen and the rest of the family. Not so.
Someone like Eric, Robbie, Gritton, or others would possibly see the benefit in this research and add a tool online that would enable this. Hold your horses. At the raw research stage it is not yet ready for full implementation.
Do I have the Pinnacle data for NH-NL? No.
wmhays has already posted a simple way to obtain the signals. I'm sure that although you don't have a Pinnacle subscription, you do have a mouse that can click on a link. :)
Does it make sense that the Treynor/(GSD^x) ratio gives the same results whether you use it ASC or DESC? No.
It gives the same on the bearish side, but vastly different on the bullish side. This simply shows that the indicator is not good for selecting the best screens to invest in during bearish markets. For the Descending sort though, it still ranks #4 out of 24. I'd say that is pretty good. And that is why it is still an excellent sort measure for all markets.
I guess that the short version is this: You produce another complicated method for achieving an astonishing set of results (CAGR = 54%, no problem) almost daily. It's overwhelming.
I'm on summer holiday where I finally have time to put to work all my ideas. I can post it, or not. Which do you prefer?
I can read and re-read the whole of the first post in this thread and it doesn't get me one inch closer to the screens I need to invest in for the next year.
Again... don't expect the raw research stage to give you tools to work with. That comes later. Just sit back and watch the process. Give it a few months to see whether it produces something you can actually use. Edison wasn't passing out light bulbs a few days after his invention.
You obviously put a lot of effort into your research and your early work on blends was very helpful - thankyou, but don't be surprised if more recent stuff doesn't elicit learned questions from the likes of me.
I'm not the least bit surprised. I don't expect any questions from those lacking the tools and ability to raise this to the next level. My hope is that those with the experience will step up to the plate and raise questions and issues that will improve the method, or trash it.
Why the focus on the timing indicator? Well I could calculate that with some effort. Then the 20% a year would make me rich by just investing in the Nasdaq. How good is that?
The return in the CAGR period does not translate in a full period return. You understand that, right? A strategy using this indicator invested long during bullish periods and safe during bearish would result in a CAGR of 16.47% with a Sharpe of 0.94 compared to a LTBH on the Russell 2000 of 10.12% with a Sharpe of 0.29. If you invested long and short, you'd get 15.92% and a Sharpe of 0.65. So it is not 20% CAGR, although it still beats out the LTBH of the index. If that is what you want, go for it.
I think Steve is making a very important point here.
Maybe the really smart people here can spend a tiny bit of their time on a fun exercise of developing simpler, lower risk methods for those of us with these very modest goals.
There are tons of ideas shared here that do what you are suggesting. There are times, however, that some of us like a bit of a challenge.
If you really want it simple here is my suggestion:
Use Robbie's backtester at the end of each year to get the daily portfolio values for each of the major screens. You can start by using what I've just posted to get the Gold, Silver and Bronze screens. Then calculate the Treynor/GSD on each of them using the spreadsheet on my blog, or that others have shared. Choose the top five screens and buy ranks 1-4 from each for the whole year. Repeat this process at the end of each year. I'd guess it would take about 5-10 hours to accomplish this. But you'd only do it once a year. I wouldn't think that is too much time to invest for your future.
During the year do not visit this board. Just come to get the screen picks once a month. Don't bother reading all this mumbo-jumbo. The method above will accomplish your very modest goals with minimum hassle and frustration.
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