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Subject:  Re: Blending at a Whole New Level Date:  8/5/2008  9:18 PM
Author:  Zeelotes Number:  211763 of 263912

Stevn asked:
Can you confirm that the improved results of re-selecting screens at transition points were all achieved using the shorter lookbacks of 6 and 3 years respectively?

Would you expect that in this case using all history would actually harm the backtested result?

Yes, I definitely used the 6/3 combination.

Here is a backtest over the full period of time using Sharpe in the bullish and Sharpe/GSD in the bearish periods:

Look-back Value     6        6       20       20
Look-back Value 3 20 3 20
CAGR 45.88% 46.22% 43.56% 43.89%
GSD 19.84 20.29 19.06 19.53
Sharpe 1.92 1.9 1.89 1.87
Ulcer Index 5.47% 6.33% 5.34% 6.53%
Average 11.48% 11.62% 10.72% 10.86%
Signal 84% 84% 82% 82%
Stock 76% 76% 74% 74%
Signal 79% 71% 79% 71%
Stock 71% 71% 71% 71%
Yrs >= Index 90.00% 90.00% 95.00% 95.00%
Yrs >= 0 100.00% 100.00% 100.00% 100.00%
Drawdown -27.57% -27.57% -27.57% -27.82%
Bullish 59.23% 59.23% 54.71% 54.71%
Bearish 29.89% 30.64% 29.89% 30.64%

I see this clearly pointing to a better result for 6/3. I have a backtest I ran on all measures that consistently put these two lookbacks to the top and that is the primary basis of my selecting these two lookbacks.

In general for evaluating backtests, I have tended to stick with Sharpe, but I think once you introduce timing elements or have times when you are in cash, the Sharpe Ratio may no longer be best. Something like CAGR/UI or (CAGR - rfr)/UI is probably better. I'm not sure to what extent we would call this whole blending process "timing", but I would tend to agree with you that UI probably tells you more than GSD and CAGR and UI probably tell you more than Sharpe.

I am definitely of this mindset.

CAGR/UI produces a value that has a much greater variance that enables one to see much more easily the mound of toast. The variance in Sharpe is just way too close to be anything more than noise.

In bull times, GSD can in fact be our friend which would make it logical that Sharpe rather than Sharpe/GSD may be a better screen selection filter - i.e. the bull / bear indicator causes us to switch between less / more conservative screens.

GSD can indeed be our friend. The fact that many of the top b