PP Inspired Momentum - A Comprehensive Approach

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InsuranceGuy
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PP Inspired Momentum - A Comprehensive Approach

Post by InsuranceGuy » Sat Apr 21, 2018 2:16 am

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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by HappyMan » Sun Apr 22, 2018 7:28 am

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,
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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by InsuranceGuy » Sun Apr 22, 2018 5:13 pm

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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by HappyMan » Mon Apr 23, 2018 6:33 am

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?
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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by InsuranceGuy » Mon Apr 23, 2018 10:04 am

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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by HappyMan » Mon Apr 23, 2018 11:58 pm

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.
Sounds like a good idea.
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.
Where can one check volatility of the last 60 days?
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.
I must say - well done on formula composition. I'll look forward to that google table with all the formulas in place.

In the case of a single asset, if it is scaled to 50%, the other 50% go to SHY?
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.
It'll be interesting to try this on the 30th of this month.
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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by D1984 » Tue Apr 24, 2018 1:39 am

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.
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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by InsuranceGuy » Tue Apr 24, 2018 10:51 pm

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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by HappyMan » Wed Apr 25, 2018 3:11 am

InsuranceGuy wrote:
HappyMan wrote:Where can one check volatility of the last 60 days?
Just download the closing prices for the last 60 days into excel and then use the STDEV function.
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,

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?
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.
People like simple. Something to play with will answer a lot of questions.

In the meantime, thank you for sharing your findings with the rest of us!
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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by InsuranceGuy » Wed Apr 25, 2018 9:19 am

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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by HappyMan » Thu Apr 26, 2018 8:26 am

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
Thanks! A titanic job well done.

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?
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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by InsuranceGuy » Thu Apr 26, 2018 9:02 am

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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by HappyMan » Fri Apr 27, 2018 4:13 am

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.
You are truly dedicated to your approach. I hope it works out and more people use it. Thanks!
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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by InsuranceGuy » Sun Apr 29, 2018 6:53 pm

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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by HappyMan » Wed May 02, 2018 9:59 am

[quote="InsuranceGuy"][/quote]

Hi,

Before volatility calculations, the equation remains 50% IVV/50% IAU. Right?
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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by InsuranceGuy » Wed May 02, 2018 11:45 pm

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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by HappyMan » Thu May 31, 2018 10:31 pm

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?
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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by InsuranceGuy » Fri Jun 01, 2018 11:33 pm

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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by HappyMan » Sun Jun 03, 2018 2:15 am

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?
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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by InsuranceGuy » Sun Jun 03, 2018 9:16 am

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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by InsuranceGuy » Fri Nov 30, 2018 10:54 pm

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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by InsuranceGuy » Tue Jan 01, 2019 12:16 am

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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by ochotona » Tue Jan 01, 2019 5:15 am

Look at SCHH as an alternative to VNQ...
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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by InsuranceGuy » Tue Jan 01, 2019 9:57 am

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Re: PP/GB Inspired Momentum - A Comprehensive Approach

Post by InsuranceGuy » Thu Jan 31, 2019 3:09 pm

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