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Investing/Strategies / Mechanical Investing
|Subject: Blending at a Whole New Level Updated||Date: 12/13/2012 12:43 PM|
|Author: Zeelotes||Number: 240534 of 263509|
Back in July of 2008 some of you may recall that I did extensive backtesting to come up with a better solution than using Excel's Solver. The idea was simple: Use the running balance of all Gold, Silver, and Bronze Value Line screens to find a measure that is more predictive of higher, and safer, returns than simply a dart board. The conclusion of all that testing was:
1. Optimal to employ a simple timing system on top to limit downside risk during bearish periods -- I suggested the Nasdaq NH-NL -- which from those posts till now has become quite well known on this forum. For the sake of my backtests today I'm using this to go wholly into Cash during the bearish periods, since my inclination and practice is this.
2. Sharpe/GSD is an excellent measure for choosing the optimal blend.
These tests are built on the premise of holding FIVE screens with each of them invested in FOUR stocks, for a total hold of TWENTY stock positions.
Original Research Links:
Blending at a Whole New Level - 7/22/2008
The Best Measure for the Best Blend - 11/16/2007
Optimizing Blends with Sharpe/(GSD^x) - 11/17/2007
Since I first shared about using Sharpe/GSD in the middle of November 2007, these tests are based on a backtest from 1/1/2008 to the present. In other words, I am seeking to validate that the method outlined back then ended up being a good one for selecting the screens to invest in to create a blend.
Indexes to Compare To
These indexes are being tested over the same time period and will serve as a benchmark for the blends that follow.
Symbol Name CAGR GSD Sharpe DDD3 BBW Drawdown
The blends that follow are all sorted based on the CAGR. Amazingly, the absolute best measure ends up being the exact same one that was determined to be best back in 2007 and 2008. A very nice confirmation of all the work that went into those posts back then.
Measure Sort CAGR GSD Sharpe DDD3 BBW Drawdown