PP Inspired Momentum - A Comprehensive Approach
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- InsuranceGuy
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PP Inspired Momentum - A Comprehensive Approach
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Last edited by InsuranceGuy on Mon Mar 08, 2021 6:25 pm, edited 31 times in total.
Re: PP/GB Inspired Momentum - A Comprehensive Approach
IG,
Nice job on outlining drawbacks of Dual Momentum.
People here like to backtest things. Can you link your portfolio to something like https://www.portfoliovisualizer.com/ or at least provide tickers for holdings.
Questions:
- How do you spread percentage-wise a depo among the six areas?
- How did your portfolio do last January?
Academic literature also would be nice.
I am sure more questions are coming.
Regards,
Nice job on outlining drawbacks of Dual Momentum.
People here like to backtest things. Can you link your portfolio to something like https://www.portfoliovisualizer.com/ or at least provide tickers for holdings.
Questions:
- How do you spread percentage-wise a depo among the six areas?
- How did your portfolio do last January?
Academic literature also would be nice.
I am sure more questions are coming.
Regards,
- InsuranceGuy
- Executive Member
- Posts: 425
- Joined: Sun Mar 29, 2015 1:44 pm
Re: PP/GB Inspired Momentum - A Comprehensive Approach
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Last edited by InsuranceGuy on Mon Mar 08, 2021 6:24 pm, edited 1 time in total.
Re: PP/GB Inspired Momentum - A Comprehensive Approach
Hi IG,
I like how more information is coming out. Appreciate that.
Found the first paper online:
http://www.optimalmomentum.com/RiskPremiaHarvesting.pdf
The process of selection seems somewhat complicated. Let's take it step by step. Suppose, one is using the strategy today. (I'll copy and correct for clarity):
1) "Momentum "Prosperity": IVV (IVV won in Dual Momentum applied to IVV and VBR and IVV returned more than SHY)";
Checked in stockcharts, same outcome.
2) "Momentum "Risk Off": IAU (IAU won in Dual Momentum applied to TLT and IAU and IAU returned more than SHY)";
Same.
3) "Value "Prosperity": n/a (VBR is higher than it was 5 years ago so it doesn't qualify)" -
Can you please expand on this component/step? Not sure why it is here and how it works.
4) "Asset Class Selection: IVV/IAU. Since we only have one "Prosperity" asset (IVV) and one "Risk Off" asset (IAU) they are both selected. If we have multiple "Prosperity" assets with a "Risk Off" asset we'd choose based on the lower variance pair, if only one asset class qualifies it is selected."
So, the outcome is either one or a pair of assets?
5) "Asset Class Allocation: 50% IVV/50% IAU. The formula above had a couple small errors and should have been Round(If(2 assets,0.5,1)*min(1,target/sqrt(252)/60-day volatility)*2,0)/2, so Round(0.5*min(1,0.085/sqrt(252)/0.002993)*2,0)/2=0.5 or 50% each."
Do you happen to have an excel file that others can use?
6) "Risk-Free Allocation: 0% SHY. Since 100% of our allocation is already taken up by IVV/IAU nothing is allocated to SHY."
If there were only one asset, then SHY would take 50%?
I see that you take the end of a month as the day for analysis and decision-making. Others prefer the 1st. Is it just a matter of preference? Also, have you thought about better times during a year to enter this strategy?
I like how more information is coming out. Appreciate that.
Found the first paper online:
http://www.optimalmomentum.com/RiskPremiaHarvesting.pdf
The process of selection seems somewhat complicated. Let's take it step by step. Suppose, one is using the strategy today. (I'll copy and correct for clarity):
1) "Momentum "Prosperity": IVV (IVV won in Dual Momentum applied to IVV and VBR and IVV returned more than SHY)";
Checked in stockcharts, same outcome.
2) "Momentum "Risk Off": IAU (IAU won in Dual Momentum applied to TLT and IAU and IAU returned more than SHY)";
Same.
3) "Value "Prosperity": n/a (VBR is higher than it was 5 years ago so it doesn't qualify)" -
Can you please expand on this component/step? Not sure why it is here and how it works.
4) "Asset Class Selection: IVV/IAU. Since we only have one "Prosperity" asset (IVV) and one "Risk Off" asset (IAU) they are both selected. If we have multiple "Prosperity" assets with a "Risk Off" asset we'd choose based on the lower variance pair, if only one asset class qualifies it is selected."
So, the outcome is either one or a pair of assets?
5) "Asset Class Allocation: 50% IVV/50% IAU. The formula above had a couple small errors and should have been Round(If(2 assets,0.5,1)*min(1,target/sqrt(252)/60-day volatility)*2,0)/2, so Round(0.5*min(1,0.085/sqrt(252)/0.002993)*2,0)/2=0.5 or 50% each."
Do you happen to have an excel file that others can use?
6) "Risk-Free Allocation: 0% SHY. Since 100% of our allocation is already taken up by IVV/IAU nothing is allocated to SHY."
If there were only one asset, then SHY would take 50%?
I see that you take the end of a month as the day for analysis and decision-making. Others prefer the 1st. Is it just a matter of preference? Also, have you thought about better times during a year to enter this strategy?
- InsuranceGuy
- Executive Member
- Posts: 425
- Joined: Sun Mar 29, 2015 1:44 pm
Re: PP/GB Inspired Momentum - A Comprehensive Approach
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Last edited by InsuranceGuy on Mon Mar 08, 2021 6:24 pm, edited 1 time in total.
Re: PP/GB Inspired Momentum - A Comprehensive Approach
It is getting clearer.
In the case of a single asset, if it is scaled to 50%, the other 50% go to SHY?
Sounds like a good idea.InsuranceGuy wrote:
I don't have any that are publicly shareable due to size, but maybe I could paste some values into Google Sheets at some point.
Where can one check volatility of the last 60 days?The idea of this is that you start with 50%/50% for pairs or 100% for a single asset class. Then you scale it down if needed based on the trailing 60-day volatility.
I must say - well done on formula composition. I'll look forward to that google table with all the formulas in place.So, in this case where the target is 8.5% volatility the min(1,target/sqrt(252)/60-day volatility) portion is simply a factor applied when the 60-day volatility is larger than the target. For example if the annualized 60-day volatility is 16% then min(1,target/sqrt(252)/60-day volatility)=min(1,target/annualized 60-day volatility)=min(1,8.5%/16%)=0.53125. If this is applied to a pair then the math is round(50%*0.53125*2,0)/2=50%, but in the case where it is applied to a single asset class the math is round(100%*0.53125*2,0)/2=50% so it scaled it back because of the volatility.
In the case of a single asset, if it is scaled to 50%, the other 50% go to SHY?
It'll be interesting to try this on the 30th of this month.As some asset classes tested in the various literature out there are only available monthly there is a bias to trade either the first/last day of the month. I have tested various days and some are slightly better or worse than others but I choose the last day both because I tend to do my trades in the afternoons and wish to not have an differences in results with other academic research by choosing a day other than the first/last of the month.
Re: PP/GB Inspired Momentum - A Comprehensive Approach
HappyMan wrote:It is getting clearer.
InsuranceGuy wrote:
I don't have any that are publicly shareable due to size, but maybe I could paste some values into Google Sheets at some point.
How big is it? Depfile offers free hosting (for less than 30 days) for any file under 1 GB.. I just did an upload speed test and uploaded a 26.7 MB Excel spreadsheet (which had a bunch of macros) and it took less than 1.5 minutes to upload.
You do have to register with an email address in order to upload but since you get access as soon as you register (i.e. they don't require you to respond to any verification email) you can just input a made-up email address and then immediately upload the file.
- InsuranceGuy
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Re: PP/GB Inspired Momentum - A Comprehensive Approach
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Last edited by InsuranceGuy on Mon Mar 08, 2021 6:23 pm, edited 1 time in total.
Re: PP/GB Inspired Momentum - A Comprehensive Approach
I admire your skills with formulas and Excel. The rest of us need little bit more explanation. If we need STDEV function, will PortfolioVisualizer work? For example, I have three different portfolios, one for each most common scenario,InsuranceGuy wrote:Just download the closing prices for the last 60 days into excel and then use the STDEV function.HappyMan wrote:Where can one check volatility of the last 60 days?
https://www.portfoliovisualizer.com/bac ... ion2_3=100
If it works, then the volatility in February-April is between 3.28 and 6.28% depending on assets' allocation. Hence, no need to adjust. Is this kind of thinking correct?
People like simple. Something to play with will answer a lot of questions.It's not just because of size, even though it is almost 500mb. I need to remove a bunch of stuff and make something simple that demonstrates the strategy without the various scenario and what-if testing that I have built-in.
In the meantime, thank you for sharing your findings with the rest of us!
- InsuranceGuy
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Re: PP/GB Inspired Momentum - A Comprehensive Approach
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Last edited by InsuranceGuy on Mon Mar 08, 2021 6:23 pm, edited 1 time in total.
Re: PP/GB Inspired Momentum - A Comprehensive Approach
Thanks! A titanic job well done.InsuranceGuy wrote: I created something simple on google sheets real quick that will give you something close enough. I just used 90 real days which will usually be 59-61 trading days. https://docs.google.com/spreadsheets/d/ ... sp=sharing
Unless you are planning to do this and publisch signals every month, there must be a way for others to do it themselves. Where can one find these numbers online?
- InsuranceGuy
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Re: PP/GB Inspired Momentum - A Comprehensive Approach
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Last edited by InsuranceGuy on Mon Mar 08, 2021 6:23 pm, edited 1 time in total.
Re: PP/GB Inspired Momentum - A Comprehensive Approach
You are truly dedicated to your approach. I hope it works out and more people use it. Thanks!InsuranceGuy wrote:
I could make that spreadsheet update automatically every time you open it, there might be a better way but I'm still looking for it.
- InsuranceGuy
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Re: PP/GB Inspired Momentum - A Comprehensive Approach
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Last edited by InsuranceGuy on Mon Mar 08, 2021 6:23 pm, edited 1 time in total.
Re: PP/GB Inspired Momentum - A Comprehensive Approach
[quote="InsuranceGuy"][/quote]
Hi,
Before volatility calculations, the equation remains 50% IVV/50% IAU. Right?
Hi,
Before volatility calculations, the equation remains 50% IVV/50% IAU. Right?
- InsuranceGuy
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Re: PP/GB Inspired Momentum - A Comprehensive Approach
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Last edited by InsuranceGuy on Mon Mar 08, 2021 6:23 pm, edited 1 time in total.
Re: PP/GB Inspired Momentum - A Comprehensive Approach
Hi,
After April, the holdings remain at 50% IVV/50% IAU, though VBR got dangerously close to IVV. Hence, a couple of questions. The strategy stays with IVV until there is even 0.01 % difference? Have you considered the situation when they break even?
After April, the holdings remain at 50% IVV/50% IAU, though VBR got dangerously close to IVV. Hence, a couple of questions. The strategy stays with IVV until there is even 0.01 % difference? Have you considered the situation when they break even?
- InsuranceGuy
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- Posts: 425
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Re: PP/GB Inspired Momentum - A Comprehensive Approach
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Last edited by InsuranceGuy on Mon Mar 08, 2021 6:23 pm, edited 1 time in total.
Re: PP/GB Inspired Momentum - A Comprehensive Approach
I see. Would you count May as month one for your approach?
Also, would it not be a more conservative approach? Wait longer and for more confirmations?
Also, would it not be a more conservative approach? Wait longer and for more confirmations?
- InsuranceGuy
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Re: PP/GB Inspired Momentum - A Comprehensive Approach
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Last edited by InsuranceGuy on Mon Mar 08, 2021 6:22 pm, edited 1 time in total.
- InsuranceGuy
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Re: PP/GB Inspired Momentum - A Comprehensive Approach
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Last edited by InsuranceGuy on Mon Mar 08, 2021 6:22 pm, edited 1 time in total.
- InsuranceGuy
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Re: PP/GB Inspired Momentum - A Comprehensive Approach
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Last edited by InsuranceGuy on Mon Mar 08, 2021 6:22 pm, edited 1 time in total.
Re: PP/GB Inspired Momentum - A Comprehensive Approach
Look at SCHH as an alternative to VNQ...
- InsuranceGuy
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Re: PP/GB Inspired Momentum - A Comprehensive Approach
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Last edited by InsuranceGuy on Mon Mar 08, 2021 6:22 pm, edited 1 time in total.
- InsuranceGuy
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- Posts: 425
- Joined: Sun Mar 29, 2015 1:44 pm
Re: PP/GB Inspired Momentum - A Comprehensive Approach
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Last edited by InsuranceGuy on Mon Mar 08, 2021 6:22 pm, edited 1 time in total.