0.88 Sharpe (last 35 yrs)

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azmat9
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0.88 Sharpe (last 35 yrs)

Post by azmat9 » Fri Feb 06, 2015 1:50 pm

CAGR = 10.9%
STDEV = 8.16%
US Mkt Correlation = 0.11
Sharpe Ratio = 0.88
negative years = 3

Strategy:
1. Take (2) of previous calendar year's highest performing assets (Stocks, Bonds, Gold).
2.  Invest 50% in each one and hold for whole calendar year

The strategy is simple yet silly enough, but the annual returns are below leading with 1980 - would be interested in hearing pros and cons (stock and bonds bull market, luck, etc):

23.47 (1980)
-15.345
31.535
11.735
8.19
31.185
21.05
9.25
1.95
21.95
-2.95
3.50
11.75
15.40
-4.80
17.35
8.70
21.30
11.50
3.20
6.15
1.90
20.85
10.90
12.45
10.25
17.80
18.30
13.75
5.95
27.40
3.75
5.05
3.35
19.45 (2014)
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MachineGhost
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Re: 0.88 Sharpe (last 35 yrs)

Post by MachineGhost » Fri Feb 06, 2015 3:38 pm

Well, you are missing the inclusion of the bond bear market of the 70's....
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
azmat9
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Re: 0.88 Sharpe (last 35 yrs)

Post by azmat9 » Fri Feb 06, 2015 3:49 pm

I didnt include this data due to the gold prices inflated this decade, but the data from starting at 1973 is as follows:

22.29 (1973)
38.075
-8.85
28.295
1.405
23.565
56.105 (1979)
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Re: 0.88 Sharpe (last 35 yrs)

Post by MachineGhost » Fri Feb 06, 2015 4:16 pm

I guess the main con would be the MaxDD looks like it would be a lot bigger than for the regular PP which is already pretty steep in 1980-1981.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
barrett
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Re: 0.88 Sharpe (last 35 yrs)

Post by barrett » Fri Feb 06, 2015 4:17 pm

Hmm. I guess one obvious question is why the results are so good. Is it due to momentum of rising assets? I am frankly quite surprised inasmuch as one of the things the PP does is buy up losers and sell down winners. Very interesting. Thanks for posting that. It would be a nice strategy in a tax-deferred account if the fundamentals going forward are sound.

Azmat, would you mind posting what the two assets were for all those years?
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Re: 0.88 Sharpe (last 35 yrs)

Post by azmat9 » Fri Feb 06, 2015 5:00 pm

Apologies for the formatting, but the Simba data is below showing strategy annual returns followed by the assets' annual returns from 1980:

Annual VIMSX VUSTX GLD
23.5 32.2 -4.2 14.7
-15.3 2.2 1.6 -32.9
31.5 23.0 40.0 14.5
11.7 23.5 0.4 -16.6
8.2 1.2 15.2 -19.5
31.2 31.7 30.7 5.3
21.7 0.0 -3.2 21.7
19.5 19.5 9.2 -15.6
20.9 26.0 17.9 -3.2
3.7 -11.7 5.8 -1.9
21.5 41.2 17.4 -10.4
8.7 16.1 7.4 -6.1
14.7 14.0 16.8 17.2
-7 -2.3 -7.0 -2.6
0.58 34.1 30.1 0.6
-1.2 18.7 -1.3 -5.0
-1.2 28.7 13.9 -21.7
9.4 9.9 13.1 -1.2
11.8 15.1 -8.7 0.4
-5.8 18.1 19.7 -5.8
4.1 -0.5 4.3 0.4
16.7 -14.6 16.7 25.0
19.1 34.1 2.7 19.1
4.5 20.4 7.1 4.5
6.6 13.9 6.6 17.8
13.6 13.6 1.7 22.0
6 6.0 9.2 30.6
4.9 -41.8 22.5 5.0
24 40.2 -12.1 24.0
23.9 25.5 8.9 29.3
9.5 -2.1 29.3 9.6
6.6 15.8 3.5 6.6
9.2 35.0 -13.0 -28.3
8 13.6 25.3 -2.2
azmat9
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Re: 0.88 Sharpe (last 35 yrs)

Post by azmat9 » Sat Feb 07, 2015 1:26 pm

correction on the previous table for annual returns only:

Year Annual Stocks Bonds Gold
1972 22.3 -26.7 -1.4 71.2
1973 38.1 -25.4 4.1 72.0
1974 -8.9 57.1 8.9 -27.6
1975 28.3 40.1 16.5 -4.5
1976 1.4 3.8 -1.0 22.2
1977 23.6 10.7 -1.5 36.5
1978 78.9 32.2 -1.5 125.6
1979 23.5 32.2 -4.2 14.7
1980 -15.3 2.2 1.6 -32.9
1981 31.5 23.0 40.0 14.5
1982 11.7 23.5 0.4 -16.6
1983 8.2 1.2 15.2 -19.5
1984 31.2 31.7 30.7 5.3
1986 21.1 17.9 24.2 20.8
1987 -1.6 0.0 -3.2 21.7
1988 14.3 19.5 9.2 -15.6
1989 22.0 26.0 17.9 -3.2
1990 -3.0 -11.7 5.8 -1.9
1991 29.3 41.2 17.4 -10.4
1992 11.8 16.1 7.4 -6.1
1993 15.4 14.0 16.8 17.2
1994 -4.7 -2.3 -7.0 -2.6
1995 32.1 34.1 30.1 0.6
1996 8.7 18.7 -1.3 -5.0
1997 21.3 28.7 13.9 -21.7
1998 11.5 9.9 13.1 -1.2
1999 3.2 15.1 -8.7 0.4
2000 18.9 18.1 19.7 -5.8
2001 1.9 -0.5 4.3 0.4
2002 1.0 -14.6 16.7 25.0
2003 18.4 34.1 2.7 19.1
2004 13.7 20.4 7.1 4.5
2005 10.3 13.9 6.6 17.8
2006 7.7 13.6 1.7 22.0
2007 7.6 6.0 9.2 30.6
2008 -9.7 -41.8 22.5 5.0
2009 14.1 40.2 -12.1 24.0
2010 17.2 25.5 8.9 29.3
2011 13.6 -2.1 29.3 9.6
2012 9.6 15.8 3.5 6.6
2013 11.0 35.0 -13.0 -28.3
2014 19.4 13.6 25.3 -2.2
azmat9
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Re: 0.88 Sharpe (last 35 yrs)

Post by azmat9 » Mon Feb 09, 2015 6:31 am

an article discussing the same strategy but with 6 month metrics:

http://www.scottsinvestments.com/2012/0 ... portfolio/
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Re: 0.88 Sharpe (last 35 yrs)

Post by Pet Hog » Tue Feb 10, 2015 1:52 am

Hi azmat9

I think your numbers are a bit off.  Could you check them again?  For example, there is no data for 1985:
azmat9 wrote: Year Annual Stocks Bonds Gold
1984 31.2 31.7 30.7 5.3
1986 21.1 17.9 24.2 20.8
Also, there are several instances where you don't seem to have followed your rebalance strategy.  For example, in 1986 the loser was stocks (not a bad loser, up 17.9%!), so in 1987 you would have selected bonds and gold, which were up +9.25% combined, whereas you listed a loss of 1.6%.  The same goes for 1988: your strategy would have picked stocks and gold from 1987, and these two assets averaged +2.0% in 1988, not +14.3%.
azmat9 wrote: Year Annual Stocks Bonds Gold
1986 21.1 17.9 24.2 20.8
1987 -1.6 0.0 -3.2 21.7
1988 14.3 19.5 9.2 -15.6
Anyway, I took your data into Excel and picked the correct two assets and got a CAGR of 12.8%.  I'm not sure I trust your original data, so could you please check them because this CAGR is great!
RyeWhiskey wrote: Out of curiosity, could you post the annualized returns along side the same set for a 34/33/33 stock/bond/gold allocation for the entire time period?
From peaktotrough.com, I get a CAGR of 10.04% from 1/1/1972 to 12/31/2014 (annual rebalance, dividends reinvested).
azmat9
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Re: 0.88 Sharpe (last 35 yrs)

Post by azmat9 » Tue Feb 10, 2015 7:03 am

Below is the corrected data.  It should have started from 1973 and not 1972 as originally posted.  Please let me know if you see any other errors.  One other change was to 2008 as stocks should not have been used, so this return also increased.  With the revisions, the annual return is 15.1% and the sharpe ratio increases to 0.984. 

Year Annual Stocks Bonds Gold
1973 22.3 -26.7 -1.4 71.2
1974 38.1 -25.4 4.1 72.0
1975 -8.9 57.1 8.9 -27.6
1976 28.3 40.1 16.5 -4.5
1977 1.4 3.8 -1.0 22.2
1978 23.6 10.7 -1.5 36.5
1979 78.9 32.2 -1.5 125.6
1980 23.5 32.2 -4.2 14.7
1981 -15.3 2.2 1.6 -32.9
1982 31.5 23.0 40.0 14.5
1983 11.7 23.5 0.4 -16.6
1984 8.2 1.2 15.2 -19.5
1985 31.2 31.7 30.7 5.3
1986 21.1 17.9 24.2 20.8
1987 9.3 0.0 -3.2 21.7
1988 2.0 19.5 9.2 -15.6
1989 22.0 26.0 17.9 -3.2
1990 -3.0 -11.7 5.8 -1.9
1991 29.3 41.2 17.4 -10.4
1992 11.8 16.1 7.4 -6.1
1993 15.4 14.0 16.8 17.2
1994 -4.7 -2.3 -7.0 -2.6
1995 32.1 34.1 30.1 0.6
1996 8.7 18.7 -1.3 -5.0
1997 21.3 28.7 13.9 -21.7
1998 11.5 9.9 13.1 -1.2
1999 3.2 15.1 -8.7 0.4
2000 18.9 18.1 19.7 -5.8
2001 1.9 -0.5 4.3 0.4
2002 1.0 -14.6 16.7 25.0
2003 18.4 34.1 2.7 19.1
2004 13.7 20.4 7.1 4.5
2005 10.3 13.9 6.6 17.8
2006 7.7 13.6 1.7 22.0
2007 7.6 6.0 9.2 30.6
2008 13.7 -41.8 22.5 5.0
2009 14.1 40.2 -12.1 24.0
2010 17.2 25.5 8.9 29.3
2011 13.6 -2.1 29.3 9.6
2012 9.6 15.8 3.5 6.6
2013 11.0 35.0 -13.0 -28.3
2014 19.4 13.6 25.3 -2.2
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Re: 0.88 Sharpe (last 35 yrs)

Post by iwealth » Tue Feb 10, 2015 8:21 am

There are many errors. Looks like most or all years from 2009-present choose incorrectly. Also I believe 1991, 1995, 2000, 2002, 2003, 2004, 2006, 2007... possibly others. That's assuming I copied and pasted the correct data.
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Re: 0.88 Sharpe (last 35 yrs)

Post by azmat9 » Tue Feb 10, 2015 10:27 am

Thanks for the feedback.  I have gone back and corrected the errors.  Final numbers are CAGR = 14.2% and sharpe = 0.91.  All data is from the Simba sheets:

Year Annual Stocks Bonds Gold
1973 22.3 -26.7 -1.4 71.2
1974 38.1 -25.4 4.1 72.0
1975 -9.4 57.1 8.9 -27.6
1976 28.3 40.1 16.5 -4.5
1977 1.4 3.8 -1.0 22.2
1978 23.6 10.7 -1.5 36.5
1979 78.9 32.2 -1.5 125.6
1980 23.5 32.2 -4.2 14.7
1981 -15.3 2.2 1.6 -32.9
1982 31.5 23.0 40.0 14.5
1983 12.0 23.5 0.4 -16.6
1984 8.2 1.2 15.2 -19.5
1985 31.2 31.7 30.7 5.3
1986 21.1 17.9 24.2 20.8
1987 9.3 0.0 -3.2 21.7
1988 2.0 19.5 9.2 -15.6
1989 22.0 26.0 17.9 -3.2
1990 -3.0 -11.7 5.8 -1.9
1991 3.5 41.2 17.4 -10.4
1992 11.8 16.1 7.4 -6.1
1993 15.4 14.0 16.8 17.2
1994 -4.7 -2.3 -7.0 -2.6
1995 17.3 34.1 30.1 0.6
1996 8.7 18.7 -1.3 -5.0
1997 21.3 28.7 13.9 -21.7
1998 11.5 9.9 13.1 -1.2
1999 3.2 15.1 -8.7 0.4
2000 18.9 18.1 19.7 -5.8
2001 1.9 -0.5 4.3 0.4
2002 1.0 -14.6 16.7 25.0
2003 18.4 34.1 2.7 19.1
2004 13.7 20.4 7.1 4.5
2005 10.3 13.9 6.6 17.8
2006 7.7 13.6 1.7 22.0
2007 7.6 6.0 9.2 30.6
2008 13.7 -41.8 22.5 5.0
2009 32.1 40.2 -12.1 24.0
2010 27.4 25.5 8.9 29.3
2011 3.7 -2.1 29.3 9.6
2012 5.0 15.8 3.5 6.6
2013 3.3 35.0 -13.0 -28.3
2014 19.4 13.6 25.3 -2.2
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