(2) Theme Observation 2: Extending the timeframe and an alternative ( variant of the original from @musselmant and @brian304 )
Key assumption : The basic stumbling block here is the Commodity Index fund … so what I did was to actually use the old Goldman Sachs Commodity Index (SPGSCI) itself. Its not tradeable of course - so what I did was to compare the screen from the 2006 period when DJP and the other ETF variants all have data - and added a friction parameter to equalize the returns. This is between 0.2% to 0.25% - at .25 it underperforms the ETFs screen. I went with 0.2% - which is roughly 2x friction of most MI screens - ie seems to have intuitive justification
Using this the test goes back to 1981 ( I am using the Fidelity Tech fund - because for some reason the Yahoo NDX Index data starts at 1987 - I wanted to get close to the LAST TIME INFLATION was an issue as much as possible. Basic guesstimate would be this would have done decently because of the commodity mix in the 1970s). If any of the GTR experts can extend the NDX100 - that should be the correct benchmark.
First the results comparison
| Period 1981 Onwards |
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| Full criteria |
Avg |
Min |
Max |
SD |
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Tr(130) Momentum |
Avg |
Min |
Max |
SD |
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| CAGR: |
17.36 |
16.09 |
18.48 |
0.63 |
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CAGR: |
14.88 |
14.10 |
15.92 |
0.51 |
| SAWR(20; 0.95): |
9.39 |
7.98 |
10.39 |
0.57 |
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SAWR(20; 0.95): |
6.93 |
5.13 |
9.42 |
1.25 |
| LDDD3: |
8.43 |
7.75 |
10.09 |
0.62 |
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LDDD3: |
10.02 |
8.43 |
11.86 |
0.86 |
| MDD: |
-41.86 |
-52.49 |
-40.43 |
3.03 |
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MDD: |
-50.73 |
-60.56 |
-40.43 |
5.91 |
As is obvious the Full Criteria beats out the simple 130 day momentum over longer periods. Why?
(a) Well I had tested each and every piece of the initial criteria before - to know that ALL had value
(i) TR (1,130) Top 3 : This is REDUNDANT here. One of the classes tested before was Bonds. That to me makes little sense - why?
The KEY DIFFERENCE between this screen and standard Asset Class Momentum Switchers is the use of BCC timing - that’s an equity indicator - specifically Nasdaq and SP500 - so perfectly suited for this test!
So essentially the concept of rotating into an alternative asset class ( neg or partially correlated with equity indices) like Bonds, Gold, Commodities etc is not fully applicable.
Adding BONDS reduces returns with BCC… ie if BCC is active no point into defensive rotation
(ii) TR (1,270) Top 2 : This is the one - it helps in the long term and reduces risk to a certain extent. Actually its more or less consistent between 270 to 300. And you can extend it between 300 to 500 - for a few decimals in return - but that’s data mining.
I chose 270 - because its roughly 2x of the shorter momentum period. 250 dont work - it just has to be longer than 1year in my observation.
(iii) tr(1,5)/tr(1,130) ratio: ST Oversold. Does just a bit better and reduces MDD by about a few points. Anything between 5 to 10 works
And here’s the screen criteria ( My alternative - you can just drop most of the others to come to the 1,130 momentum)
http://gtr1.net/2013/?!!QlpoMTFBWSZTWSAKLe4AAzDfgBAAIgd!2F8D!2FnT!2BA!2F797hQAL9lFGWNZgkUpNNptFPNFNqHpqaNNABpp6mgASIRTJT9E9GpPU9TTah6gNAGmjTQGA0AAA0AAAAAASSjE00JqbU00aDQGgGRo8p6T1FtEWt8Vht9a!2FzJ473WDYmDL4YgwpoPTowGLyKnyZUEndEDefLdvVh7LGh64ioiCITDrJRykKphTfLURavQtIGDbjtk7KgMvYWndZYoIhcxsnGITKVltBQh4ZgmmIjQCjNaEH9wXBcDg1BizGNSmjGdcnG9S7FySVKagnmHgjajSjg9LT1FQTjspmMNEtZtLMo25cttUYGj6ESiJMTFjTHk4QMaYU0YjMnFLByubtJs12fb1oiuDQkIsJBEG72GRZTOag4MEzxAlsismHfvuLWZ7s8LrHUi7ROaRhINhGnTsBK0WCwChi6mkKB!2B9gDaFQNBheXaH02AuMR3BdQzjzywh1TpyKpOyuN!2BHL04eOrTEFR3zB0GXhjPwUDwn58zy7kFs6!2Fn6I9yrHEYxwRuFvpVm1UEVNe22McyPnGnWV!2FCCrfBB9BJFKrkGqVKQ0R26kXtdw4ffMypNuXhYtnuRyDb7Vu8L!2Fo!2BKRrxU!2FKrtwEr95fECO8FJicC7HBVloETkyHxKUKx8JQH67wI!2B06M5lupDOFehwaEbqKXCmQGyrQqo4lATquAUyRjYOHRn2iGKilmCoCAHffaci2rGBNsTjEgNrRJFppSsK!2BvmMMLwr2V3DgHKpXAdLgLNTihSrOzy07KgcrkZGlFhxK6knQOlK3kTM0NKDimah7ANw!2FEMgMcA1l7xGBgYtb5jzUcJRVz!2FEDOvoMd8DymjlJYGKDJ7JgUcSM95kA1nkqaiqGkM5YNLQumQZoyuuNU7!2FxdyRThQkCAKLe4A!3D!3D
