No. of Recommendations: 6
Pandrea,
Thanks. I find that getting questions often helps me, by getting me to verify my findings claims and assumptions. And sometimes discovering that there was a mistake or something overlooked or misunderstood.
In this instance I decided to create the timing signal from scratch and make the parameters to be variables so that many combinations could be tested. Instead of the previous ad-hoc hardcoded values.
The CAGRs with timing are suspiciously high, so I triple checked that there was not inadvertent look-ahead bias. The statistics held even with lags of 1, 2, and 3 weeks. Astonishing.
(All done in Excel spreadsheets.)
[Ah, I get it. Not panda. P and Rea.]
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I found the best timing scheme for these related momentum screens to be sell at -4% below the 64 week SMA of S&P500.
It was best in Sortino, STDEV, and MaxDD(12).
Much less important, also marginally best CAGR of the timings tested. But all the CAGRs were in the same ballpark.
There were 12 OUT periods.
Of those, 6 were whipsaws. Defined as switching between IN and OUT within 2-3 months.
The longest OUT period was 30 months.
The second longest OUT period was 18 months.
The portfolios:
RS52 5HTD12, P-HL52 5HTD12, Overlaps of top 5 in RS52 & P-HL52
Rankings by Sortino ratio:
P-HL52, Overlap, RS52
Ranking by MaxDD (by 12 month drawdown of the end-of-month values):
Overlap, P-HL52, RS52
All three had about the same STDEV, close to 25%.
The portfolios ranking by timed CAGR for 2006-2026:
Overlap , P-HL52, RS52
