SCV+Momemtum Permanent Portfolio

[MachineGhost]

I think that Dual Momentum seems worth the bother to either increase your return or reduce your MaxDD.  It really just means a few extra trades 1 day/year.

Next up I'm going to try and get Russell 2000 daily results back to 1979 and run that through a similar process for the PP+SCV scenario.  It may be a few days though as I need a day break or so after all that excel waiting...

I like trend following for reducing the ridiculous risk of the PP, so maybe I'll shoot for that.  I can get much better returns for the amount of risk the relative momentum adds with other strategies.  I'll send you some more data files I forgot I had.

I also need to do a downscaled CRPPP for 1973-2015 so we can see how that compares.

[InsuranceGuy]

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[stuper1]

I think that Dual Momentum seems worth the bother to either increase your return or reduce your MaxDD.  It really just means a few extra trades 1 day/year.

Next up I'm going to try and get Russell 2000 daily results back to 1979 and run that through a similar process for the PP+SCV scenario.  It may be a few days though as I need a day break or so after all that excel waiting...

I'm looking forward to hearing what your PP+SCV+MOM backtesting looks like with daily results.

[modeljc]

I can get much better returns for the amount of risk the relative momentum adds with other strategies.

What strategies do you prefer if you don't mind me asking?

Me too MG.  I hope you have a strategy or something that you believe in and have finally settle on.  I made fun of you about a year ago.  I am sorry but I had a extra beer and said I did not think you would ever settle on a LONG TERM approach.  Sorry for a bad post.

Any thing yet?

 

[MachineGhost]

What strategies do you prefer if you don't mind me asking?

Nothing that is investment related, I'm afraid.  It's all trading, though of course the time frame will vary.  But it's not for the lazy.

[MachineGhost]

Any thing yet?

I'm happy with the CRPPP rescaled back to the HBPP risk and using equal factor exposure.  Hits all the spots.  I remain undecided about momentum, but am interested to see what IG can come up with.

EDIT: Wait a minute!  I'm settled but not happy.  I think the amount of risk inherent in the HBPP sucks, but what can you do?  It is what it is.

[InsuranceGuy]

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[MachineGhost]

IG, I've put the latest stats on the 100% Top1-4 dual momentum backtesting with cleaner data over here:

http://gyroscopicinvesting.com/forum/pe ... #msg146961

Also, I don't subtract the RFR or a minimum return from the UI for calculating the UPI.

Top3 Dual Momentum has really got me interested and all just once a year!  What we really need to do next is a robustness check by varying the monthly rebalancing date just to make sure there's no calendar flukes.

[InsuranceGuy]

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[Dieter]

I might have done something wrong, but did some manual checking for a monthly momentum strategy, and many changes over the last 15 months (8 or 9 depending on the date checked.)

PP+SCV+MOM, TOP-2 & TOP-3 (where > 0%); otherwise Cash
Based on 12 month trailing returns.
Checked / re-allocate monthly
Manually checked using Morningstar charts
Vanguard Mutual Funds + IAU:

VFIAX (S&P 500, "LCB" below)
VISVX (SCV)
VUSTX (LTT)
IAU (Gold)

Checked both first of the month and the 20th.



Date Top-2 Top-3

1/1/15 LCB,LTT LCB,LTT,SCV
2/1/15 " "
3/1/15 " "
4/1/15 " "
5/1/15 " "
6/1/15 LCB,SCV "
7/1/15 " "
8/1/15 LCB,LTT "
9/1/15 LTT LTT
10/1/15 " "
11/1/15 LCB,LTT LCB,LTT,SCV
12/1/15 " "
1/1/16 LCB LCB
2/1/16 None None
3/1/16 LTT, Gold LTT, Gold
4/1/16 LTT, LCB LTT, Gold, LCB


If use the 20th of the month...



Date Top-2 Top-3

1/20/15 LCB,LTT LCB,LTT,SCV
2/20/15 " "
3/20/15 " "
4/20/15 " "
5/20/15 LCB,SCV "
6/20/15 LCB,LTT "
7/20/15 LCB,SCV "
8/20/15 LCB,LTT "
9/20/15 LTT LTT
10/20/15 LCB,SCV LCB,LTT,SCV
11/20/15 LCB,LTT "
12/20/15 None None
1/20/16 " "
2/20/16 LTT, Gold LTT, Gold
3/20/16 " "
4/20/16 TBD... TBD...


Fewer moves with Top 3
20th of the month had fewer moves for Top-3, more for Top-2 vs 1st of the month

Can reduce the number of moves if only switch assets if trailing 12 month return difference isn't trivial (for example, 4/1, LCB only trivially higher 12mo return vs Gold, same with the LTT/SCV churn last summer if I recall correctly.)

URL: http://quotes.morningstar.com/chart/fun ... ture=en_US
  (remove the indexes, add the above ticker symbols, adjust the dates....)

Let me know if you see holes in what I did....

[Edit: I don't like ETFs, and like Vanguard, ergo the selections above, which I know are sub-optimal for LTT and SCV]

[InsuranceGuy]

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[MachineGhost]

I did UPI = (CAGR - RFR)/UI like a daily Sortino which made sense to me based on what I have read.  It seems like when using nominal returns you should subtract the RFR at a minimum to avoid giving too much influence to older years where inflation was higher.  Thoughts?

It makes sense if you're calculating it during higher inflation years, but since you do it at the end (i.e. right now), current RFR doesn't have that much negative impact.  Perhaps a better way is to subtract the RFR from each year's return before calculating the total CAGR/UI at the end?  That makes more logical sense.  If it were possible to use dynamic interest for UPI in my backtests outside of Excel, I would do it that way.

Top3 Dual Momentum has really got me interested and all just once a year!  What we really need to do next is a robustness check by varying the monthly rebalancing date just to make sure there's no calendar flukes.

I agree on some level, but am apprehensive to be too exhaustive as things tend to settle down around year end when people tax loss harvest and then take a break for Christmas/New Years which I think makes it an attractive time to rebalance.  Spring and Fall months may be a good place to start while the summer months with low trading volume maybe not be ideal test candidates imho.

Apprehensive to be too exhaustive = behavioral bias.

So, I'm concerned it's exploiting the size effect in January which doesn't exist in the other months.  I will do the backtests on all the other months today to settle the issue.  Based on my previous HBPP backtesting, it will hold up because the PP concept is solid, but the downside risk will vary significantly (there was a fight at one time where I was told to prove the -25% MaxDD but it wasn't asked in a nice manner so I ignored the cretin).  The point here is to have realistic expectations so you won't get a) oversurprised b) prematurely think a system is failing when it isn't.

Speaking of which, I am going to see if I can get the OHL into the cleaner daily data for the SPX.  It occured to me that the intraday extremes are still missing so the MaxDD is likely being understated.  The data I sent you is daily because it is a synthesis of available investment vehicles not the SPX, although I think even mutual funds don't have OHL prices.

[InsuranceGuy]

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[stuper1]

IG,

I sent you a PM.

[InsuranceGuy]

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[stuper1]

stuper - since you asked, here is what the PP+SCV looks like using the same data only trading semianually.  For those of you at home, this is still a 12 month lookback just trading 2x/year instead of once.  The patterns and ideal pick are very similar across the two scenarios.  Could be worth it if you like that kind of thing.  Maybe I'll start investing my 1st half of the year 401k money in July instead of just leaving it in cash until the end of the year.



Anyways, back to finding better daily return data...

Looks to me like it's hardly worth the effort to trade semiannually for the TOP2 version, which seems the best.  The CAGRs and UPIs are virtually the same.

[MachineGhost]

Anyways, back to finding better daily return data...

You won't find anything better than what I got, but I don't expect you to believe me.   So check out Quandl and if they don't have it, you likely won't find it via Google.

[InsuranceGuy]

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[MachineGhost]

I probably won't find anything better, but it's interesting trying to piece everything together.  I think at a minimum I can improve on the older TBond returns.  Maybe I'll confirm your 25%DD claim. 

I'll race you on the bonds!  j/k  I'm burned out.  It shouldn't be that hard to use 20-year + RFR + inflation, etc. to impute 30-year yields with a linear regression.  Whoops, I even forgot that was built into Excel!

Of course, all this is going to do is increase the MaxDD even more.   How much more pain can we take?

[InsuranceGuy]

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[stuper1]

Whatever the true MaxDD for the PP, the recovery time is about half what it is for a lot of other portfolios.  It's good to know beforehand that 20 to 25% drawdown is possible.  That way if it happens, you can just clench your fists and hold on, rather than capitulating and locking in losses.

[MachineGhost]

No pain no gain right? 

It probably can't be anymore painful knowing the true MaxDD... I'd rather know the exact diagnostics for an investing portfolio than be surprised down the road.

Much ado about nothing <wipes sweat>.  TBonds v2 knocks .10% off the return and ups the MaxDD by .10%.  R^2 was 99%.

[InsuranceGuy]

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[InsuranceGuy]

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[InsuranceGuy]

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