jnafach
74 posts
msg #92024
- Ignore jnafach |
5/4/2010 7:42:44 AM
There was a study where tried to buy top 10 holding in berkshire hathaway and keep rotating which did better than BRK.A, now I wonder if we apply same on all their holdings and see if get better income than it and low risk
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Kevin_in_GA
4,599 posts
msg #92025
- Ignore Kevin_in_GA |
5/4/2010 8:08:10 AM
And oh yeah, I wasnt trying to invalidate anything. This is a great approach, Kevin, and seems like you and the ETFreplay guys were in sync the whole time!
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As a scientist, I love it when others challenge any data in a rigorous fashion - the goal is to validate and possibly improve on a system, from which everyone can benefit. Thanks for doing this.
One thing that is interesting to note though is that I've yet to find an instance where "rebalancing" weekly gave a better result than rebalancing monthly (at least per ETFreplay's tester). It seems like you'd be able to get in and out quicker without the delay of waiting for a month before you look at things again, but it doesn't pan out that way.
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Me neither. My original assumption was that weekly rebalancing would let you catch trends faster, but it ends up that you simply get whipsawed more.
EDIT: I just found one instance - set the relative strength timeframe to 100% on 20 days, EEM,IWM, and SHY. Looks like rebalancing weekly will improve your results when you timeframe for RS is shorter. However, this approach returns, at best, only half of the return using the 50/50 split and trading once monthly.
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sbuck143
88 posts
msg #92026
- Ignore sbuck143
modified |
5/4/2010 8:24:50 AM
My one concern with this is since it is date related for entry / exit, that we may see wildly different results depending on what day of the month you decide to rebalance. Their tester is based on 1st day of the month rebalancing
1st of the month re-balancing, will surely give you different results than 15th of the month, which will differ from 10th of the month, etc. And as we all know with Black Monday, Sep 2008, Sep 2001, etc, all it takes is being in or out on a single day to have a massive effect on your equity curve.
EDIT:
I'm seeing some interesting results with bigger timeframes for the Relative strength testing.....try 6 months and 3 months (with a monthly rebalancing) with some of the combos!
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guymar
113 posts
msg #92027
- Ignore guymar |
5/4/2010 8:48:34 AM
I included DBC, OIL, EEM, SPY, IEV, SHY, SH, DOG, PSQ, EUM to have coverage of all situations (boom in Oil, growth pickup in Europe first, emerging economies first, commodities first, also to be able to benefit from short situations) and obtained over the period June 2006 to now 26 796 USD with an initial 10 000 USD portfolio.
This is a compound annual rate of 27,94% during a huge crisis. Furthermore it's possible to optimize this and avoid some losses by using Fibonacci turn dates and going cash during that month. In that case the portfolio really triples.
What is even more interesting is that these ETF's are liquid, so there is very little slippage (except in the ETF's themselves) and the entire thing does not take a lot of time....
Bravo to everyone here, if I can find an indicator to improve results, I'll let you know....
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Kevin_in_GA
4,599 posts
msg #92028
- Ignore Kevin_in_GA |
5/4/2010 8:52:30 AM
All of my calculations (and those from etfreplay.com) are done on the last trading day of the month for both buying and selling. The monthly close is used for backtesting.
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guymar
113 posts
msg #92029
- Ignore guymar |
5/4/2010 9:16:40 AM
In my case: first trading day of the month, at the close.
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sbuck143
88 posts
msg #92030
- Ignore sbuck143 |
5/4/2010 9:37:21 AM
guymar- did you just take the top ranked one or a number of them?
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Kevin_in_GA
4,599 posts
msg #92031
- Ignore Kevin_in_GA |
5/4/2010 9:38:31 AM
I included DBC, OIL, EEM, SPY, IEV, SHY, SH, DOG, PSQ, EUM to have coverage of all situations (boom in Oil, growth pickup in Europe first, emerging economies first, commodities first, also to be able to benefit from short situations) and obtained over the period June 2006 to now 26 796 USD with an initial 10 000 USD portfolio.
This is a compound annual rate of 27,94% during a huge crisis. Furthermore it's possible to optimize this and avoid some losses by using Fibonacci turn dates and going cash during that month. In that case the portfolio really triples.
What is even more interesting is that these ETF's are liquid, so there is very little slippage (except in the ETF's themselves) and the entire thing does not take a lot of time....
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Remember also that the goal is not just maximizing returns, but also managing risk. The volatility in these asset classes should also be monitored - if you can get a similar return with less risk why would you not do so?
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guymar
113 posts
msg #92033
- Ignore guymar
modified |
5/4/2010 10:58:19 AM
Point taken, I will try and take time to compile Sharpe ratio and compare with your selection.
For this reason there were no leveraged ETF's in the list.
The ETF's in the list are in my personal opinion a good representation of the typical money flows. The 3 states of the market up, down, sideways would result in a strategy: up: long, down: short, sideways: look for alternatives (commodities, oil, emerging markets, or europe).... It's not substantiated by research, but I had the feeling the ETF's included are not adding to much beta.
On the other hand, it might be better to include drawdown and drawdown period as well ..?
So to be clear: I did not extend the list to maximize profits, more to diversify and be able to track a large panel of investors as they would go looking for opportunities. I don't think this strategy alone would work with leveraged ETF's though.
I invested in only 1 ETF, top of the list, except if the new top of the list did not exceed an existing position by more than 0,01 alfa (trying to take in account price slippage on trades and transaction cost).
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Kevin_in_GA
4,599 posts
msg #92036
- Ignore Kevin_in_GA |
5/4/2010 11:29:42 AM
Point taken, I will try and take time to compile Sharpe ratio and compare with your selection.
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HERE YOU GO:
IN TABLE VIEW, IT IS EASY TO SEE THE RESULTS FOR BOTH THE 21 DAY AND 63 DAY TIMEFRAMES (INCLUDING SHARPE RATIO, ALPHA, AND BETA). 21 TRADING DAYS IS EQUAL TO ONE CALENDAR MONTH.
ETFS ARE STILL RANKED BASED ON ALPHA RATHER THAN SHARPE IN THIS FILTER. ONE CAN EASILY RANK THEM BY SHARPE RATIO INSTEAD (JUST SORT ON COLUMN 5 DESCENDING). THIS DOES REDUCE OVERALL YIELD, PERHAPS BY MORE THAN NECESSARY - YOU ARE OCCASIONALLY MOVED INTO BONDS OR CASH BASED ON THEIR VERY LOW VOLATILITY AT THE EXPENSE OF HIGHER YIELDING ALTERNATIVES.
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