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URL:  http://boards.fool.com/stevn-asked-in-post-211390-you-posted-results-26874391.aspx

Subject:  Re: Blending at a Whole New Level Date:  8/4/2008  9:40 PM
Author:  Zeelotes Number:  211737 of 254098

Stevn asked:
In post 211390, you posted results for the VL universe from 1989 - 9th Nov 2007 and you show the following results using Sharpe for Bullish and Sharpe/GSD for bearish for selecting a 20 stock 5 screen blend.

FYI: All the posted results up to 11/9/2007 were done this way to make them comparable to last November's research. I did this simply because I did not want to rerun all those tests again, but I did want an apples to apples comparison.

I'm not quite sure what I am looking at below:

Unfortunately, the confusion comes from the fact that this is up to the present, not up to 11/9/2007.

Also, are the other columns only for the bear and bull periods
respectively or are they for the full period? if the latter, the
Sharpe for Sharpe/GSD at 1.83 seems very high when compared to the
resulting Sharpe of 1.57 for Treynor/GSD as reported in post 211385
considering that Treynor/GSD was considered better than Sharpe/GSD
for selecting a blend for holding in both bull and bear.


This is partly due to the advantage gained from re-selecting screens at the indicators transition points. I have not yet been able to arrive at a good explanation of why this improves on returns so much, but it most definitely does. IOW it would be better to just use the indicator and stay with the same measure than it would be to simply rebalance the screens you use at the end of each year. All that is changed is the date when you rebalance. Of course, you rebalance a whole lot more, but I've proven already that rebalancing at fixed time periods actually hurts results, not helps them, so the issue is not adding more rebalance points, but rather, adding them at the points in time decided on by the NH-NL indicator.

The other factor is that the 2.07 Sharpe resulted from the first run where I allowed the indicator to produce a switch in less than thirty days.

I guess what I am really asking here is that 211390 seemed to be telling
me that by using this method rather than Treynor/GSD all the time, I could
increase the resulting Sharpe from 1.57 to 2.07 which is truly amazing.
The results above seem to be saying that using this method rather than
Sharpe/GSD will only increase the resulting Sharpe from 1.83 to 1.93 if
the 1.83 refers to what you would get using Sharpe/GSD all of the time.

Am I misreading something?


The post 211390 was the result of the fix where I had not included the screen history from 1986 to 1989 which resulted in poor results for 1989 and 1990 since they insufficient data. But it was actually after that that I modified the indicator so that no changes were done within one month. Here is a comparison between the two. My own opinion is that I'd still choose the one on the right despite the lower Sharpe. Partly I would do this due to the pratical implications of the reduced rebalance points, but also because I don't see the UI getting hurt by the reduced trading. Plus, when I compare the yearly returns I don't see something massively different. Your thoughts? Can Sharpe alone decide it for you?

                          No Sig in     
One Mth
Begin Date: 1/2/1989 1/2/1989
End Date: 11/9/2007 11/9/2007

Bullish: Sharpe Sharpe
Desc Desc
Bearish: Sharpe/GSD Sharpe/GSD
Desc Desc
CAGR 48.58% 47.48%
GSD 19.17 19.61
Sharpe 2.07 1.99
Ulcer Index 5.48% 5.33%

Bullish:
Reb Win % 78% 84%
Screen Win % 70% 76%
Bearish:
Reb Win % 83% 79%
Screen Win % 72% 71%

Yrs >= Index 89.47% 89.47%
Yrs >= 0 100.00% 100.00%
Drawdown -27.57% -27.57%
Bullish 59.79% 59.23%
Bearish 30.43% 29.89%

Years ROI ROI
1989 67.99% 67.99%
1990 0.84% 4.45% 1 Mth
1991 93.46% 92.93%
1992 69.87% 67.97%
1993 42.28% 44.85% 1 Mth
1994 30.27% 25.97%
1995 91.62% 72.75%
1996 39.90% 41.37% 1 Mth
1997 41.36% 43.55% 1 Mth
1998 36.26% 30.93%
1999 144.16% 127.36%
2000 77.02% 81.13% 1 Mth
2001 37.17% 37.41% 1 Mth
2002 35.77% 35.77%
2003 36.15% 36.15%
2004 43.54% 41.12%
2005 56.08% 57.70% 1 Mth
2006 15.58% 12.73%
2007 13.03% 19.01% 1 Mth

Let me share a table that compares the two peroids -- the ones on the left stop on July 19, 2008 while the others end last November. The result for 1999 for the Sharpe/GSD makes me very wary. Would you keep using the method after experiencing such a massive year of under-performance? Personally, I'm inclined to think not.

Start Date:   1/3/1989                      1/3/1989                   
End Date: 7/19/2008 11/9/2007
Sharpe/GSD Sharpe Blend Sharpe/GSD Sharpe Blend
CAGR % 34.60% 39.75% 45.41% 35.68% 41.37% 47.48%
GSD 15.41 26.72 19.43 14.95 26.65 19.61
Sharpe 1.83 1.34 1.93 1.92 1.38 1.99
UI 4.97% 14.98% 5.25% 4.81% 15.16% 5.33%
Max DD -28.66% -54.51% -26.63% -28.66% -54.51% -27.57%
1989 39.21% 75.51% 67.99%
1990 -5.44% 15.31% 4.45%
1991 83.87% 91.52% 92.93%
1992 70.88% 56.49% 67.97%
1993 43.15% 39.85% 44.85%
1994 20.78% 39.70% 25.97%
1995 51.69% 74.88% 72.75%
1996 34.55% 45.46% 41.37%
1997 46.34% 45.77% 43.55%
1998 30.78% 22.73% 30.93%
1999 13.27% 141.82% 127.36%
2000 53.22% -11.00% 81.13%
2001 48.69% 3.29% 37.41%
2002 34.59% 54.36% 35.77%
2003 31.63% 30.55% 36.15%
2004 36.24% 42.39% 41.12%
2005 35.95% 49.44% 57.70%
2006 13.48% 11.21% 12.73%
2007 15.04% 19.25% 19.01%
2008 8.24% 3.02% 8.24%

On a related note: If there was sufficient interest, I would think it feasible for a project to be done as a joint effort where a tool could be made available to facilitate finding the new blend components at each transition point. I'm not offering to do it on my own, but I am willing to assist if there are some ready to participate. In fact, I'm already working toward this goal... we'll see where it leads.
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