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Investing/Strategies / Mechanical Investing
|Subject: Re: maybe done||Date: 5/17/2013 4:11 PM|
|Author: Rayvt||Number: 243139 of 253833|
my point was it's the conundrum any MI investor/timer faces. To the point:
* The actual results of all the MI screens Bill2m tracks show marked decrease in performance in the summer months (including YEY)
* Many backtests show marked decrease in performance in the summer months (including YEY)
==> so there is rational evidence that screens (including YEY) could be avoided in summer months and not markedly affect performance.
Somewhere in my bookshelf or directory full of papers & articles is (are??) discussions of the methodologies of making screens. Not screens themselves, but the way screens are constructed. Perhaps O'shaughnessey in the latest edition of WWOWS?
The discussion basically says that every rule or screening factor must have a rational reason *why* it is a good characteristic to use. Things like low P/E, low P/CF, etc. are things that you can make a cogent argument for.
But I don't know how to make a cogent argument for a date on the calendar. "Everybody goes to the Hamptons?" "School is out?"
Simply saying "backtests over the last couple of decades have worse performance over the summer" isn't an argument. It's an observation. And it's the type of thing that "Fooled By Randomness" is all about.
I've always thought it was kinda data-dredging. There are a zillion things that you can backtest for, and *some* of them will align with the data. But how do you know if it's just happenstance? If there's not a strong rationale for why that factor is good, then the only argument you have is "well, it worked that way when I tested it."
As far as timing by price -- SMA, RS, momentum, NH-NL, etc. -- IMO the arguments seem weak. They are basically rooted in human nature of the way investors tend to behave. And the empirical observations goes back several centuries.
FWIW, I just skimmed the index of WWOWS 4th ed. I don't know if O'Shaughnessey investigated timing or not - but the index does not have ANY entries for: calendar, May, sell, summer, or timing. 650 pages and he didn't mention any of these.
My YEY has also underperformed recently in the "bullish" period - it was essentially flat for me from October on. While the indexes have gone up close to 20% in 6 months, the screen has been flat.
That's why it's a good idea to run several different, unrelated strategies/screens.
My account which is 75/25 YEY and BND had grown 11.7% from Oct 1 to May 1 -- 7 months. So I guess the YEY portion grew around 15%.
SPX grew 10.9% in that same time. ACWI grew 8.3%. SPY (dividend adjusted) grew 12.2% Kinda hard to compare directly, since I go by last Friday of month rather than last calendar day.
But, true, my total portfolios have underperformed the S&P almost every month for the last couple of years.
FWIW, my YEY has been one of my stellar performers over the last couple of years.
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