[…]systems is to rank those assets by their price momentum, or return, over a given historical window and to rotate into the assets with higher momentum. This approach seeks to capitalize on the well-demonstrated tendency for price momentum to persist. But, it begs some questions: “What is an appropriate historical period for measuring price momentum?” Clearly, the momentum of a given asset can rank quite differently compared to the tradable universe over 1 month, 3 months, or 6 months. “Is one historical period sufficient?” If relative momentum can vary widely depending on the historical window, would it be better to […]
[…]to worry about. Ratio of Return to HV100 Maybe the return per unit of volatility is changing? For example a 2% return of a stock with a HV100 of 20 differs from a 2% return with a HV100 of 50. The chart is showing the average of the return divided by HV100, then multiplied by 10,000. The 10,000 is used to give nicer looking numbers. I am not sure how to interpret this one. The numbers in late 1990’s are lower than expect but the mid 90’s are higher. An interesting chart but what does it say? Spreadsheet Fill the […]
[…]Growth Fund. He was curious to see back tested results. Always looking for new ideas to write and tested, I jumped on it. Unfortunately, the results will not be exactly as he trades it. Andrew uses the IBD50 as his trading universe. As is the bane to stock researchers, I do not have historical data on the IBD50. One could create some great models using that data. Instead, the test will be on the standard stock universe Even though I am changing the universe, if the concept works on my general stock universe then it should work on the IBD50. […]
[…]posts. Recently I was reading the article Trending Fast and Slow and thought about other ideas to test. The article is based on research on trading the SPX and depending on the current historical volatility one would either use a 12-month or a 1-month lookback to decide whether to enter or exit the trade. I had tried similar ideas before but not this one. Now what is here is not a final strategy to trade, as stated in the original article, but still an interesting concept. I wanted to know how robust it is and test some variations. Original Rules […]
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[…]was how could the massive run since 2009 not have gotten us above the average. As usual, I had to test it. Timeframe Norgate data has the $SPX back to 1930. Using that as my starting point, I used the monthly closes until 10/31/2021. From that, I calculated rolling 5-year, 10-year and 20-year returns on the index. 20-Year Rolling Returns The middle orange line is the 50% percentile of returns. The top yellow line is the 90% percentile while the grey line is the 10% percentile. The 12/31/2020 20-year rolling return was 184%, which was way lower than I […]
[…]save me a step and I could always use the Russell 3000. What a time saver. This data allows one to test on the index without preinclusion bias. Grade: A+ Ability to Backtest all stocks Sometimes I have strategy ideas that I want to test on all stocks, not just those in the Russell 3000 or any other index. IPOs and other stocks not yet in an index behave differently than their more established counterparts. Norgate Data has a special group called “Operating/Holding Company” which holds all the stocks in the database I would want to test against. This is […]
[…]go see that post at ETF Sector Rotation. Even though these test are on mutual funds, I still want to compare to our original best test. Idea 1: Rank by multiple ROCs The first idea submitted by multiple readers is to use multiple look back periods for Rate of Change. This test was also done on the ETFs. Rules At the end of the month, rank the Funds by the average of the 3/6/9/12 month’s performance. Formula is (ROC 3 month + ROC 6 month + ROC 9 month + ROC 12 month)/4. Buy the top 3 Funds if the […]
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[…]had no understanding of back testing or research. However, I did have a few ideas that I wanted to test out that I had picked up from reading various articles. Cesar helped me to develop them over the past year into an extremely profitable strategy. He has been consistently helpful in suggesting improvements, consistently patient in sorting out my confused plans, and consistently available in making sure that all of my ideas are tested and all my questions answered. He works fast, his fees are more than reasonable. I honestly can’t recommend him enough. Nobody knows what the market will […]
