tag:blogger.com,1999:blog-261139923818144971.comments2021-04-15T11:15:40.730+01:00This Blog is SystematicRob Carverhttp://www.blogger.com/profile/10175885372013572770noreply@blogger.comBlogger2180125tag:blogger.com,1999:blog-261139923818144971.post-47989458877782899392021-04-15T07:40:36.794+01:002021-04-15T07:40:36.794+01:00very interesting - thanks for sharing Rob. I am mo...very interesting - thanks for sharing Rob. I am moving my own long only investing towards an ETF Model Portfolio as described in Smart Portfolios but keep it fairly stable (for now at least) i.e. don't re-allocate based on momentum/forecast. I underestimated the time you can spend finding ETFs that are right for you :-) !Anonymoushttps://www.blogger.com/profile/09405651798870322961noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-2968774157672923642021-04-14T17:18:48.694+01:002021-04-14T17:18:48.694+01:00You're welcome
Hope you are well.You're welcome<br />Hope you are well.Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-18987468523792019132021-04-14T16:39:33.714+01:002021-04-14T16:39:33.714+01:00wonderful work as always Robert. Thank you for all...wonderful work as always Robert. Thank you for all your sharing!<br />Riccardo Roncohttps://www.blogger.com/profile/03328033100025832786noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-89921910797896876482021-04-12T21:36:14.949+01:002021-04-12T21:36:14.949+01:00Does look a lot like your "Normalised Momentu...Does look a lot like your "Normalised Momentum" from your June 2017 blog article on "some more trading rules". If I can make a general observation comparing this indicator to your EWMA Cross Strength Forecast. Because a strong trend tends to have higher volatility which is in the denominator, it provides a less extreme forecast, an issue you manage by applying the -20/+20 forecast limits as well described in your books. I know, I know, I am just looking at charts, but the result looks like less extreme forecast and a tendency to catch a long/short switch quicker than the EWMA on price for the same trading speed. Why, because of the imbedded volatility. Apologies - I thought I was attaching this to your recent Volatility related post...Riskunhttps://www.blogger.com/profile/00198617189367150178noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-60633584870760060792021-04-12T19:29:49.118+01:002021-04-12T19:29:49.118+01:00Oh right. That won't be *that* different from ...Oh right. That won't be *that* different from using an EWMA with a normalisation by vol... if vol is constant it will produce identical results.Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-40279408491417945812021-04-12T18:54:16.061+01:002021-04-12T18:54:16.061+01:00Well, at least your in a good mood. I'll go ah...Well, at least your in a good mood. I'll go ahead and do some testing. Specifically I mean using an EWMA cross but instead of the price series, use a fast and slow lookback of calculated Sharpe ratio - say 10 day, 40 day lookbacks to calculate moving Sharpe Ratios as one example. Much thanks for the quick reply.<br />Riskunhttps://www.blogger.com/profile/00198617189367150178noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-14237805112973664352021-04-12T13:45:51.679+01:002021-04-12T13:45:51.679+01:00Yes on reflection, this would probably make more s...Yes on reflection, this would probably make more sense than the version I described.Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-73773128666856546752021-04-12T10:49:54.873+01:002021-04-12T10:49:54.873+01:00Apologies for not being clear. For “adjusted forec...Apologies for not being clear. For “adjusted forecast”, I mean the “raw forecast” adjusted by “forecast scalars”. <br />So, what if we applied “L” to this “adjusted forecast”? Would that be acceptable?<br /><br />Thanks!Unknownhttps://www.blogger.com/profile/05821050393149046409noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-23647691502518319692021-04-12T10:46:43.002+01:002021-04-12T10:46:43.002+01:00What's the 'adjusted' forecast??What's the 'adjusted' forecast??Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-20775420488601987052021-04-12T10:40:15.542+01:002021-04-12T10:40:15.542+01:00Thanks for your reply, Robert.
Follow-up question...Thanks for your reply, Robert.<br /><br />Follow-up question: what if we applied “L” to the “adjusted forecast” instead? Would that be acceptable ?<br /><br />Thanks, RicUnknownhttps://www.blogger.com/profile/05821050393149046409noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-12583518571682092232021-04-12T08:50:49.675+01:002021-04-12T08:50:49.675+01:00You've been clear, but you are missing the fac...You've been clear, but you are missing the fact that the forecast scalars are effectively fixed.<br /><br />That means they won't 'rein in' risk as you describe, since we're going to multiply the modified forecast by the same scalar regardless of environment.<br /><br />Now for the disclaimer: they're not exactly fixed, since they are estimated on a rolling out of sample basis. That means if we start in say an (ex-post) low vol environment then the the forecast scalars will be too low (since the raw forecast is higher, and the scalar doesn't need to be as large); but after a few years it should be sorted out.Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-38379189806326248252021-04-12T08:47:30.325+01:002021-04-12T08:47:30.325+01:00Totally unrelated to this article, but I'm in ...Totally unrelated to this article, but I'm in a good mood so I forgive you. I've never used the indicator described, and I don't even know what it means. The only thing I'd say is that 'At least on some charts...' makes me worry that you are doing some very unsystematic testing that is likely to result in an in sample fit and poor out of sample performance.Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-14499552064675819532021-04-10T16:55:57.878+01:002021-04-10T16:55:57.878+01:00Hi Rob. I have been trading continuously using sev...Hi Rob. I have been trading continuously using several trading rules as you describe in your 2 trading books - EWMA Crosses and your version of breakouts. Not sure it is related to this article but I have recently been looking at adding Sharpe ratio fast/slow crosses as a way of including volatility into the trading system. At least on some charts, the same trading speed seems to provide earlier and more profitable long/short switching. Before I test it further, do you have any thoughts/experience on using Fast/Slow Sharpe Ratio Crosses as a trading rule?Riskunhttps://www.blogger.com/profile/00198617189367150178noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-22995569496791454222021-04-10T12:20:49.398+01:002021-04-10T12:20:49.398+01:00Hi Rob - I would like to ask you a clarification o...Hi Rob - I would like to ask you a clarification on the following statement:” I use the raw forecast here. I do this because there is no guarantee that the above will result in the forecast retaining the correct scaling. So if I then estimate forecast scalars using these transformed forecasts, I will end up with something that has the right scaling”.<br /><br />If we apply “L” to the “raw forecast” and then we apply the “forecast scalars” to the raw forecast adjusted by L, then are we not diluting / losing the overall signal coming from L? I mean, the overall signal might well say - hey, it’s a high vol environment, let’s rein in risk; but then our forecast scalars will say, No, we need to adjust the position upward to make it more like an average bet, whisk we don’t want to take an average bet in the forecast adjusted for L is low.<br /><br />I hope I have been clear. If not let me know. <br /><br />Thanks,<br />RicUnknownhttps://www.blogger.com/profile/05821050393149046409noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-19683929709221803462021-04-08T09:37:11.189+01:002021-04-08T09:37:11.189+01:00Vol calculation is covered by one of the existing ...Vol calculation is covered by one of the existing sheets here https://www.systematicmoney.org/systematic-trading-resources<br /><br />https://docs.google.com/spreadsheets/d/1NJw1cnnsVCG6QxXutylmUJ-0naV8QZHonZZ6rCtTRo8/edit?usp=sharingRob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-4147124321191635052021-04-07T22:56:16.244+01:002021-04-07T22:56:16.244+01:00Hi Robert - maybe I am asking too much but I’ll tr...Hi Robert - maybe I am asking too much but I’ll try. Would you be able to upload an excel sheet on “systematic trading” webpage and show how all the adjustments are made and how to calculate the daily price vol with stitched price series, as you describe here? Thanks!Unknownhttps://www.blogger.com/profile/05821050393149046409noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-30585897697407199932021-04-06T14:30:58.984+01:002021-04-06T14:30:58.984+01:001) I've adjusted these to reflect the typical ...1) I've adjusted these to reflect the typical range of Sharpe Ratios experienced for the bond/equity dividend yields. I guess this is in the spirit of a 'forecast scalar'.<br /><br />2) Fixed<br /><br />The 90:10 split is my personal preference, and reflects my high tolerance for risk (so it's optimised for geometric return not Sharpe Ratio). Feel free to modify it.Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-22986801080502748832021-04-06T11:09:24.314+01:002021-04-06T11:09:24.314+01:00Thank you for updating this portfolio. I am follow...Thank you for updating this portfolio. I am following it for my various analysis. I have a couple observations/questions.<br />1) The equity trailing / adjustment factor table has values of -0.08, -0.06 etc.. I was using the -0.8, -0.6 etc. table, which is in your book Smart Portfolios and also used for the “Asset” spreadsheet calculations. Is it an updated one, or a typo? <br />2) Bonds. The US Gov cell “Sharp ratio net of dividend” takes the cell H12 of “Calculations”. That refers to UK, not US Gov. It should be H15 instead, unless I am mistaken.<br />Also, more generally, I would be interested to know whether the rather aggressive 90-10 split to equity is related to a higher propensity for risk in general, or to concerns for the Bond asset class due to possible rate hikes and the way Bond ETF are built. <br />A relatively high allocation to equity HY seems to indicate you expect to get income from this source rather than from Bonds? <br />Thank you <br />grebloghttps://www.blogger.com/profile/00194169308415101405noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-57162702769676086852021-04-06T09:53:37.940+01:002021-04-06T09:53:37.940+01:00Basically the portfolio level SR determines the po...Basically the portfolio level SR determines the portfolio level risk target; everything is then scaled to that including each individual instrument, and since instruments are given portfolio weights adding up to 100% you'll hit the portfolio risk target (after applying an 'instrument diversification multiplier' to account for diversification which would otherwise result in us undershooting the risk target).Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-17136437367032677892021-04-06T09:51:24.855+01:002021-04-06T09:51:24.855+01:00You're right - that isn't continous, just ...You're right - that isn't continous, just a bunch of prices pasted next to each other.Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-44446059048706212762021-04-05T23:52:34.532+01:002021-04-05T23:52:34.532+01:00Hello Rob, how do you define your Sharpe (for use ...Hello Rob, how do you define your Sharpe (for use in the exposure calculation, i.e. choosing risk target) when Sharpe depends on the amount of exposure available to the instruments? Do you calculate per-instrument returns assuming 100% allocation separately then combine somehow? Thanks.Chrishttps://www.blogger.com/profile/08225448977926903328noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-17913274187546343592021-04-05T18:43:28.244+01:002021-04-05T18:43:28.244+01:00Robert,
On Barchart, I was double checking the pr...Robert,<br /><br />On Barchart, I was double checking the prices between the time series of continuous prices of the first contract with the actual historic prices of individual contracts and I found out there is an exact match between the prices of the two series, which means that the continuous time series of prices does not seem to be *back-adjusted*. Therefore, “continuous” might just simply mean that Barchart attach time series together without back-adjustment.<br /><br />I believe this is not what a continuous time series should be? Unknownhttps://www.blogger.com/profile/05821050393149046409noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-67850663446796482802021-04-05T16:55:54.483+01:002021-04-05T16:55:54.483+01:00See my reply above "I don't get continous...See my reply above "I don't get continous data from brokers"<br /><br />I only use individual futures contract prices which I stitch together.Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-38076922735548855922021-04-05T16:54:33.485+01:002021-04-05T16:54:33.485+01:00Thanks Robert
I’ve emailed Barchart and I’ll see...Thanks Robert <br /><br />I’ve emailed Barchart and I’ll see what they say. If they don’t offer the continuous times series on the second contract, is there anything else you could suggest to get this data? <br /><br />Out of curiosity, how did you deal with this issue when you first had to backtest your system? Did you not bump into the same issue? <br /><br />Any advice or suggestion will be highly appreciated.<br />Thanks Unknownhttps://www.blogger.com/profile/05821050393149046409noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-25777879970434810982021-04-05T16:37:39.757+01:002021-04-05T16:37:39.757+01:00You haven't downloaded the contionous series f...You haven't downloaded the contionous series for FXM21 - there is no such thing. You've downloaded the continous series for Eurostoxx, or for the first contract to be precise. And it seems like in their interface, whatever contract you click on, if you ask for a continious series it will give you the same one: most likely the first contract. And what you also need is the continous series for the second contract. Do Barchart offer this? How do you get it? On both questions, my answer is 'I don't know'.Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.com