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aleman64 writes:

I just finished a bullet backtest using GrandPoobah's data. I did the standard bullet (drop when a stock moves to #4).

Type CAGR (12 years)
RS-13 35.8% (3 years out of 12 had negative returns)
RS-26 -7.8% (9 years out of 12 had negative returns)
RSW 33.7% (5 years out of 12 had negative returns)

Many months (and even years) with 50% drops. Many negative years (especially for the RS-26 method). Basically, the regular portfolio does as well or better without the large std dev.

Don't try this at home; it can be dangerous to your wealth.


Before commenting, I absolutely want to first say that I have not done this test myself. So a good response could be "Try it yourself, and see."

But, It is hard to believe these results. I guess I think that the stock that is in the number one period will always be a part of a RS 26wk M5. And will continue to be included as it bounces around in the rankings, both on the way up and down, as long as it is in 5 or higher. So that it will have a lot of influence on the returns for the strategy. Since it will always be a part of the M5 strategy, it just seems unlikely that the strategy can have the returns it does, and overcome the penalty that this #1 stock with the negative returns is putting on the group. But maybe it made such gains going from 5 to 1 in the first place that it makes up for it. Still, it seems odd.

Good Returns
Charley Meng

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