This is a great article that uses Monte Carlo to simulate 300 years of market data using 10 different portfolios including the Permanent Portfolio. Results are attached:
http://www.nasdaq.com/article/the-most- ... n-cm279719
Study using 300 years of data
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MachineGhost
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Re: Study using 300 years of data
Great find! It further supports my contention the PP really should be risk-normalized ala risk-parity, but it's not absolutely critical.
Last edited by MachineGhost on Fri Jan 09, 2015 10:27 am, edited 1 time in total.
"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!
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!
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Kike Moreno
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Re: Study using 300 years of data
Could you please explain a bit more? What would be a "risk-normalized" PP ?
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MachineGhost
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Re: Study using 300 years of data
Read the article and the definition of the "Risk Parity" portfolio. There are other measures than volatility that could be used.Kike Moreno wrote: Could you please explain a bit more? What would be a "risk-normalized" PP ?
"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!
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!
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Kike Moreno
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Re: Study using 300 years of data
Have you applied the concept to the PP to derive a variation of it? Which is the proposal? % of each asset, fixed or variable percentages?, etc.
Re: Study using 300 years of data
Agreed with risk parity - i only question if it is actually worth the extra time required vs. the minimal (set and forget annually) approach of the PEP. It is very minimally below the RPP as shown below:
http://static.cdn-seekingalpha.com/uplo ... origin.png
http://static.cdn-seekingalpha.com/uplo ... origin.png
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MachineGhost
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Re: Study using 300 years of data
The extra time could be minimal if it is applied annually or only at rebalancing bands. PEP is only below the RRP because gold's risk contribution is outsized vs stocks and bonds. That is basically what needs fixing.azmat9 wrote: Agreed with risk parity - i only question if it is actually worth the extra time required vs. the minimal (set and forget annually) approach of the PEP. It is very minimally below the RPP as shown below:
http://static.cdn-seekingalpha.com/uplo ... origin.png
"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!
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!
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MachineGhost
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Re: Study using 300 years of data
I have used 60-day trailing volatility and monthly rebalancing, so it would be a fixed percentage for a month. And some other variations in backtests. But like azmat says, I don't think its worth the extra time and stress to do it so frequently. You're going to save, what, -5% at most in terms of maximum drawdown? You would have to be extremely obsessed with the PP to wake up one day and look at that exact moment in time that it was at its deepest trough.Kike Moreno wrote: Have you applied the concept to the PP to derive a variation of it? Which is the proposal? % of each asset, fixed or variable percentages?, etc.
Last edited by MachineGhost on Fri Jan 09, 2015 10:05 pm, edited 1 time in total.
"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!
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!
Re: Study using 300 years of data
Thanks, I would really appreciate that. I am interested in learning more how you use 60-day trailing volatility and how to properly normalize to a target risk.
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MachineGhost
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Re: Study using 300 years of data
I'll write a separate post about it. It's not difficult its just a bit of math.azmat9 wrote: Thanks, I would really appreciate that. I am interested in learning more how you use 60-day trailing volatility and how to properly normalize to a target risk.
"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!
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!