UnThreaded | Threaded | Whole Thread (9) | Ignore Thread Prev | Next
Author: spazz7 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 251809  
Subject: YEY/EG SP500 EMA Switch Torpedoed Date: 7/16/2008 10:28 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 30
Starting is message http://boards.fool.com/Message.asp?mid=26810031, fred04 indicated the positive results of switching between the YEY screen and the EG screen based on the crossover of the 200 day moving average of the SP500. The switch return of 40% was significantly higher than the individual screen returns of 33 and 29%.

Later, in post http://boards.fool.com/Message.asp?mid=26812041, Zeelotes completed a more extensive analysis of this switch. His work had a switch based on short and long EMA's on the SP500. One other change from fred04's work was that Zeelotes used a 10 stock hold, where fred04's was 5.

Zeelotes made a statement which I'd like to address later in the post. Specifically, said 'No matter what EMA levels you choose all of them beat out holding these two individually'. From a sharpe perspective, I'll go about to prove this wrong.

It's probably obvious from my introduction as well as my subject title, but the intention of my work is to see if this positive result will hold up to multi start date testing via the GTR1 backtester.

For clarification and completeness, the following are statements comparing my analysis to Zeelotes. For the most part, I believe the work I completed is almost identical to Zeelotes, except for:
1. I used the daily returns for a 10 stock hold, 21 cycle, 21 day hold screen from Jamie's GTR1 backtester. I believe Zeelotes used a 10 stock, single cycle, monthly returns/stock picks from Jamie's monthly backtester
2. My results are an average of these 21 starts
3. My results contain returns up to Dec 31 2007, as Zeelotes went to March of 2008. The impact of this difference should be minimal.

Before I display the results, I'll state a quick executive summary:
1. From a pure Sharpe perspective, this switch idea is torpedoed when using all start dates.
2. My highest EMA switch CAGR of 34.2% is not much higher than Zee's lowest EMA swithc CAGR of 31.17%, and doesn't even come close to his highest switch return of 41.49%.
3. Although it could be said that the switch CAGR's are categorically higher than the individual screens, it must be added that the switch Sharpe's are categorically lower than YEY's.
4. Reversing the screens (where YEY is the high screen and EG the low screen), deteriotes the sharpe's minimally. (due to size, I won't display the results that back up this statement). It should follow that if the switch truly increased performance above the performance of the individual screens, then the reverse strategy should be the opposite. It doesn't.
5. A 50/50 blend of these two screens would have provided a larger sharpe, lower ulcer index and lower maxDrawDown (DD) than any one my 156 EMA switch tests.
5. One's optimal play, at least historically, would have been to blend the two screens, with a blend of 11% EG, 89% YEY, which gives a Sharpe of 1.403

What follows are the matrices of the relevant metrics. I've bolded the high and lows for the respective group. The rows are the shorter EMA levels, and the columns are longer EMA levels. At the very bottom is return metrics for differing blend percentages.

Lance

                 150        155        160        170        180        190        200        210        220        230        240        250
CAGR 20 32.2% 32.3% 32.4% 32.7% 33.2% 33.8% 34.1% 34.1% 34.1% 34.2% 34.2% 34.1%
25 32.2% 32.3% 32.6% 33.0% 33.7% 34.1% 34.1% 34.0% 34.0% 33.9% 33.6% 33.4%
30 32.4% 32.6% 32.8% 33.6% 34.0% 34.0% 34.0% 33.9% 33.6% 33.3% 33.3% 33.2%
35 32.7% 32.9% 33.4% 33.9% 33.9% 33.9% 33.7% 33.5% 33.2% 33.1% 33.2% 33.0%
40 33.1% 33.7% 33.8% 33.9% 33.8% 33.6% 33.3% 33.1% 33.1% 32.9% 32.7% 32.6%
45 33.7% 33.7% 33.7% 33.7% 33.4% 33.2% 33.0% 33.0% 32.8% 32.5% 32.5% 32.2%
50 33.6% 33.5% 33.5% 33.4% 33.1% 33.0% 32.8% 32.5% 32.5% 32.3% 31.7% 31.6%
55 33.4% 33.4% 33.4% 33.1% 32.9% 32.7% 32.3% 32.3% 32.3% 31.7% 31.6% 31.5%
60 33.4% 33.2% 33.2% 32.9% 32.6% 32.3% 32.3% 32.3% 31.6% 31.5% 31.4% 31.4%
65 33.1% 33.1% 32.8% 32.6% 32.3% 32.3% 32.2% 31.6% 31.5% 31.3% 31.3% 31.4%
70 32.9% 32.7% 32.5% 32.3% 32.2% 32.1% 31.6% 31.5% 31.3% 31.3% 31.4% 31.4%
75 32.5% 32.4% 32.3% 32.2% 32.1% 31.6% 31.6% 31.4% 31.3% 31.3% 31.4% 31.5%
80 32.4% 32.3% 32.2% 32.2% 31.6% 31.5% 31.4% 31.3% 31.3% 31.4% 31.4% 31.5%

150 155 160 170 180 190 200 210 220 230 240 250
GSD 20 32.2% 32.3% 32.3% 32.3% 32.4% 32.5% 32.5% 32.6% 32.7% 32.7% 32.8% 32.9%
25 32.3% 32.3% 32.3% 32.4% 32.5% 32.6% 32.6% 32.7% 32.8% 32.8% 33.0% 33.1%
30 32.4% 32.4% 32.5% 32.6% 32.6% 32.7% 32.8% 32.8% 32.9% 33.1% 33.1% 33.1%
35 32.5% 32.5% 32.6% 32.6% 32.7% 32.8% 32.9% 32.9% 33.1% 33.1% 33.1% 33.2%
40 32.6% 32.6% 32.7% 32.7% 32.8% 32.9% 33.0% 33.1% 33.1% 33.2% 33.2% 33.3%
45 32.7% 32.7% 32.7% 32.9% 32.9% 33.1% 33.1% 33.2% 33.2% 33.3% 33.3% 33.4%
50 32.7% 32.8% 32.9% 33.0% 33.1% 33.1% 33.2% 33.2% 33.3% 33.3% 33.5% 33.6%
55 32.9% 32.9% 32.9% 33.1% 33.1% 33.2% 33.2% 33.3% 33.3% 33.5% 33.5% 33.6%
60 33.0% 33.0% 33.1% 33.1% 33.2% 33.3% 33.3% 33.3% 33.5% 33.5% 33.6% 33.6%
65 33.1% 33.1% 33.1% 33.2% 33.2% 33.3% 33.3% 33.5% 33.5% 33.6% 33.6% 33.7%
70 33.1% 33.2% 33.2% 33.2% 33.3% 33.3% 33.5% 33.5% 33.6% 33.6% 33.6% 33.7%
75 33.2% 33.2% 33.2% 33.3% 33.3% 33.5% 33.5% 33.6% 33.6% 33.6% 33.7% 33.7%
80 33.2% 33.3% 33.3% 33.3% 33.5% 33.5% 33.6% 33.6% 33.6% 33.7% 33.7% 33.7%

150 155 160 170 180 190 200 210 220 230 240 250
Ulcer 20 12.7% 12.7% 12.7% 12.7% 12.6% 12.6% 12.6% 12.6% 12.7% 12.6% 12.6% 12.7%
25 12.7% 12.7% 12.7% 12.6% 12.6% 12.6% 12.6% 12.7% 12.7% 12.7% 12.8% 12.8%
30 12.6% 12.6% 12.6% 12.6% 12.6% 12.6% 12.7% 12.7% 12.8% 12.9% 12.9% 12.9%
35 12.7% 12.6% 12.6% 12.6% 12.7% 12.7% 12.8% 12.8% 12.9% 12.9% 12.9% 12.9%
40 12.7% 12.6% 12.6% 12.7% 12.7% 12.7% 12.8% 12.9% 12.9% 12.9% 13.1% 13.2%
45 12.6% 12.7% 12.7% 12.7% 12.8% 12.8% 12.9% 12.9% 13.0% 13.2% 13.3% 13.4%
50 12.7% 12.7% 12.8% 12.8% 12.9% 12.9% 13.0% 13.1% 13.2% 13.3% 13.6% 13.6%
55 12.7% 12.8% 12.8% 12.9% 12.9% 13.1% 13.2% 13.3% 13.3% 13.6% 13.6% 13.6%
60 12.8% 12.9% 12.8% 13.0% 13.1% 13.3% 13.3% 13.4% 13.6% 13.6% 13.7% 13.7%
65 12.8% 12.8% 13.0% 13.1% 13.3% 13.3% 13.4% 13.6% 13.6% 13.6% 13.7% 13.7%
70 12.9% 13.0% 13.1% 13.3% 13.3% 13.4% 13.6% 13.6% 13.6% 13.7% 13.7% 13.8%
75 13.1% 13.2% 13.3% 13.3% 13.4% 13.6% 13.6% 13.6% 13.7% 13.7% 13.8% 13.7%
80 13.2% 13.3% 13.3% 13.4% 13.6% 13.6% 13.6% 13.6% 13.7% 13.7% 13.7% 13.8%

150 155 160 170 180 190 200 210 220 230 240 250
maxDD 20 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3%
25 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.4% 46.4%
30 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.4% 46.4% 46.4% 46.4% 46.4%
35 46.3% 46.3% 46.3% 46.3% 46.4% 46.4% 46.4% 46.4% 46.4% 46.4% 46.4% 46.4%
40 46.3% 46.3% 46.4% 46.4% 46.4% 46.4% 46.4% 46.4% 46.4% 46.4% 46.4% 46.5%
45 46.4% 46.4% 46.4% 46.4% 46.4% 46.4% 46.4% 46.4% 46.4% 46.5% 46.5% 46.7%
50 46.4% 46.4% 46.4% 46.4% 46.4% 46.4% 46.4% 46.4% 46.5% 46.5% 46.8% 46.8%
55 46.4% 46.4% 46.4% 46.4% 46.4% 46.4% 46.5% 46.5% 46.5% 46.8% 46.8% 46.8%
60 46.4% 46.4% 46.4% 46.4% 46.4% 46.5% 46.5% 46.5% 46.8% 46.8% 46.8% 47.2%
65 46.4% 46.4% 46.4% 46.4% 46.5% 46.5% 46.5% 46.8% 46.8% 46.8% 47.2% 47.3%
70 46.4% 46.4% 46.4% 46.5% 46.5% 46.5% 46.8% 46.8% 46.8% 47.2% 47.3% 47.9%
75 46.4% 46.4% 46.5% 46.5% 46.5% 46.7% 46.8% 46.8% 47.2% 47.3% 47.9% 48.2%
80 46.4% 46.5% 46.5% 46.5% 46.7% 46.8% 46.8% 47.1% 47.3% 47.5% 48.2% 48.6%

150 155 160 170 180 190 200 210 220 230 240 250
Sharpe 20 0.983 0.985 0.989 0.995 1.007 1.022 1.029 1.026 1.027 1.027 1.027 1.021
25 0.983 0.985 0.992 1.001 1.019 1.027 1.026 1.022 1.022 1.017 1.006 1.000
30 0.986 0.992 0.995 1.014 1.023 1.023 1.023 1.018 1.007 0.997 0.995 0.993
35 0.993 0.997 1.009 1.020 1.020 1.018 1.010 1.004 0.994 0.991 0.992 0.987
40 1.000 1.015 1.017 1.019 1.015 1.008 0.998 0.990 0.989 0.985 0.978 0.975
45 1.015 1.015 1.014 1.010 1.003 0.994 0.988 0.986 0.980 0.972 0.971 0.962
50 1.012 1.007 1.005 1.002 0.991 0.988 0.981 0.973 0.971 0.966 0.947 0.944
55 1.002 1.003 1.001 0.991 0.984 0.977 0.968 0.967 0.966 0.946 0.943 0.939
60 1.002 0.995 0.993 0.983 0.975 0.968 0.967 0.965 0.944 0.942 0.936 0.936
65 0.993 0.990 0.983 0.975 0.967 0.966 0.963 0.944 0.942 0.936 0.935 0.937
70 0.986 0.978 0.974 0.967 0.964 0.962 0.943 0.942 0.936 0.934 0.936 0.937
75 0.974 0.971 0.967 0.963 0.961 0.944 0.942 0.937 0.934 0.934 0.935 0.937
80 0.970 0.967 0.963 0.963 0.944 0.942 0.938 0.935 0.933 0.935 0.936 0.937


% EG  CAGR   GSD    MaxDD  Ulcer  Sharpe
0% 25.0% 14.7% 24.3% 5.5% 1.368
5% 25.4% 14.8% 24.2% 5.0% 1.393
10% 25.9% 15.0% 24.7% 4.7% 1.403
15% 26.3% 15.3% 25.2% 4.7% 1.400
20% 26.7% 15.8% 26.0% 4.9% 1.385
25% 27.0% 16.4% 26.7% 5.0% 1.360
30% 27.4% 17.2% 27.5% 5.3% 1.328
35% 27.7% 18.0% 28.3% 5.7% 1.291
40% 27.9% 19.0% 29.1% 6.1% 1.251
45% 28.2% 20.1% 30.0% 6.5% 1.210
50% 28.4% 21.2% 30.9% 7.1% 1.169
55% 28.6% 22.4% 32.1% 7.7% 1.129
60% 28.8% 23.7% 33.6% 8.5% 1.090
65% 29.0% 25.1% 35.7% 9.4% 1.053
70% 29.1% 26.5% 38.0% 10.4% 1.018
75% 29.2% 28.0% 40.7% 11.6% 0.984
80% 29.3% 29.5% 44.0% 13.0% 0.953
85% 29.3% 31.1% 47.7% 14.6% 0.923
90% 29.3% 32.8% 51.4% 16.4% 0.895
95% 29.3% 34.5% 55.0% 18.4% 0.869
100% 29.3% 36.2% 58.5% 20.5% 0.844
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (9) | Ignore Thread Prev | Next

Announcements

Post of the Day:
Value Hounds

Medallion Financial: TAXI!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement