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Investing/Strategies / Mechanical Investing
|Subject: Re: Blending at a Whole New Level||Date: 7/25/2008 8:12 AM|
|Author: Zeelotes||Number: 211498 of 265233|
I'm getting ready to wrap up this new research related to blending. Before I do, I thought I'd post what I would consider the best that I have to offer on the subject of what is the optimal way to sort screens for bearish and bullish periods. This is based on millions of data points, and hundreds of tests. The tables that follow are the result of taking all of that and finding what measure had the best return. I did this by taking the 78-88 VL test, the 89-08 VL test and the 99-08 SIPRO test. I found the ranking for each of these tests for each measure, then I averaged the ranks. I did this first for all three, and then again, just for the 89-08 VL test and the 99-08 SIPRO test. I personally put more weight on the latter two since the earlier test has so few screens to sort off from.
What these tables will answer is this:
Which sorting measure has produced the highest forward return on a blend when used to select five screens holding ranks 1-4 from each for a total hold of twenty stocks?
My conclusion from all of this testing is not so much that one particular measure most definitely stands out in the crowd, but rather that quite a few are consistent winners. Choosing nearly any of these from the top wouldn't hurt. In fact, it may also be possible to choose to blend the results that would come from the top five. Say five stocks from each measure resulting in choosing five screens for each measure so going with the top four measures would result in actually holding twenty stock positions.
Bullish Periods All 3 VL-SIPRO
So this tells us that GSD Ratio with a descending sort is the absolute best for the bearish periods. Ulcer Index comes in second, and the Treynor/GSD is fourth.
Bearish Periods All 3 VL-SIPRO
What screens would this strategy blend for right now?
I know this is the question many are asking. Well, the top ranking position for bearish periods is GSD Ratio. This is one of my home-grown measures.
The second best measure is the Ulcer Index with the Sleep Ratio right behind it. These two are basically one and the same. Here is what you'd get with these.
The next one down in the list is the one that came out on top for bearish and bullish periods -- that is, for not choosing between periods but invested the same all the time. As you can see in this list, it pays to apply some overlap removal method to blends since many of these will choose the same stocks.
The other thing to keep in mind is that much of my later testing was done on the Olympic standard screens of Gold, Silver, and Bronze. Those tests would result in some of these screens being removed.
Anyway, I consider this to have arrived at a culmination to this research project. If you have any further questions don't hesitate to ask.
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