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|Subject: Re: Blending at a Whole New Level||Date: 8/6/2008 9:06 AM|
|Author: StevnFool||Number: 211773 of 258064|
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:
Given what I had said before, was expecting greater drop for the 20 year lookback relative to 6/3.
May be the case. What is the advantage of this over just using CAGR/UI?
This was in respone to my suggestion of using Sortino. The short answer is that I don't really know. The reason I suggested Sortino is that it is a recognized way of combining returns and volatility to evaluate returns in a risk adjusted way. Some function of CAGR and UI will also do this, I'm just not certain if dividing CAGR by UI is the right way to do it.
I ran a test with a 12 month LAG to explore your idea. Of course, a thorough check this does not make, but it provides an evaluation based off of the optimal blend combination I've found of Sharpe for bullish and Sharpe/GSD for bearish:
I'd say the damage is too severe to make it workable for me, but that doesn't mean it is not usable for others. What do you think?
If you have the means to do it in real time, I would agree with you. If you don't, then even with a 12 month lag, it is a lot better than just using Sharpe/GSD or Treynor/GSD and evaluating each yearend so in the absence of the ability to do it in real time, I would say that yes it is workable.
Could I ask you to run the 12 month lag test with 12/6 lookback instead of 6/3 to confirm if my theory is correct that a longer lookback can in some way make up for the lag?
Also, are you calculating Sharpe and GSD using an all day start like the GTR1 backtester or a single start like Jamies backtester. If a single start is sufficient, we could probably use a shorter lag.
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