Notes/Questions: If you stretch the period to 1995-2022, it looks quite different compared to the performance of the S&P500, since your comparison in the picture starts in a downturn phase of stocks. Why did you sell your BTC? What does the spread look like with the EM small caps? Is it worth it to take the higher spread e.g. compared to EM IMI? You have to keep in mind that you have higher spread and trading costs the more GTAA goes back and forth between assets. This is not included in the backtests. Say: as simple / few assets as possible. Additionally, the question of a buffer position arises for me here, in case an asset just held slips just one position below the holding limit. Much of what I just mentioned certainly doesn't apply to your bond shell, does cost something p.a. and you are somewhat limited, hence these questions especially regarding your offensive variant.
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@theflyingsquirrel Yes, of course you're right that the comparison looks different from 1995 onward. But not completely different. I chose 2001 for two reasons. 1. I see the current situation quite similar to 2001: Long bull market ahead, US large tech massively valued, interest rate hikes. So I want to know how the model copes with this phase. The comparison with a boom phase is analogous to 2015-2021, where you can see that GTAA is lagging a bit, but not much. What I find decisive about the GTAA is the outperformance in difficult stock market years. That was also the reason why I started to deal with GTAA. 2. very pragmatic: the tool gives me Nasdaq100 only until 2001.
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@theflyingsquirrel Thanks for pointing out the spread of the EM SC! Besides the tradability and TER, that is of course an important point that I would have to include more. In mine it is about 70 basis points, ie 0.7%. Relevant in the assessment would probably be the average holding period and performance. If one loses 0.7% when buying EM SC and the average gain is 1%, then that does nothing. But if the profit on EM SC is 10% with 5 months holding period and on EM IMI 5%, then it could be worthwhile. I'll have to do some research.
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1Yr
@theflyingsquirrel The trading frequency is of course a point. But it does not depend 1:1 on the amount of assets. Rather it is the SMA and the selected momentum periods. With about 4 signals per year, this is also within limits, I think. Of course you can reduce the amount of signals, e.g. every 2 months one, but this is at the expense of the performance. If you drive GTAA with more assets, you also have a higher probability to catch one that outperforms all others. If you have only a few (3), then the signals could constantly switch back and forth between two mediocre ones. The idea with the buffer position is of course not new. I had also already considered, especially if the asset universe is somewhat larger. Unfortunately, I haven't been able to backtest it and I'm afraid that it doesn't really improve the model. But in principle, I agree with you. If you have a choice between two similarly good models, then you should take the one with fewer signals. Regarding BTC: I did not completely liquidate the position, but reduced it to about 20%. I found that I feel more comfortable with this size at this vola. Ie as long as the buy signal is active, I stock BTC every month.
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@Epi Interesting with the comparison of the current situation to 2000. What would be important to me to say: The more assets you have in the momentum selection, the higher the probability that two assets are somewhat more correlated, these then run relatively the same and then the signals if it goes very badly between them every month swings back and forth. I would just be careful with the selection: For me important parameters in the selection: Top1-3 select depending on portfolio volume; assets with little correlation, there EMU SC is well positioned in my opinion and you have the SC factor in it; select assets with clear trends; select currencies for the individual assets, mostly in €; as simple as possible and as complex as necessary because of spread costs etc.; always consider the spreads on the assets and weigh, I find Xetra Gold e.g. also better than Euwax 2; I'm more pro buffer position, because it makes the whole simpler and brings some inertia into the system, thereby suffers of course the momentum but could also reduce false signals in return, the lower costs by the less switching can be offset against a lower performance, Röhl has in his semi-well-researched video also mentioned that the buffer position hardly costs performance and it is therefore worthwhile, where he should have the knowledge no idea, but I just wanted to let you know.
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@Epi I'm curious what you find out in relation to the EM SC, I'm also looking at the spread of the new EM SC ESG ETF, maybe the spread is lower. By the way, I would be happy if you could explain your 2 strategies completely, because I notice that I tend in the same direction, then we can debate about it and both adjust our individual screws.
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@Epi not easy the whole topic, but it comes more and more light into the dark. Regarding BTC: just wondered because in your gq profile BTC is not displayed.
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@theflyingsquirrel BTC is not displayed? I have two accounts running there, TR and mylife. TR should display BTC. For me it does
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@theflyingsquirrel I agree, the more assets, the higher the correlation probability. That's why more is not necessarily better. When I test the assets, I also expand and concentrate the assets several times. With the TR-GTAA I am now at 6 assets plus BTC. 3x stocks, 2x bonds, 1x commodities. All low correlated.I have also thought about how to avoid the oscillation every month. Since this mostly happens in trendless phases, one could possibly add a trend indicator. On the other hand, you can also just sit out these phases and trade stubbornly. They rarely last longer than 3-6 months. The buffer position is possibly worthwhile from Top3 and with a large asset basket. With the mini-variant US Tech, EU Small, US Treasuries Top 1 this does not work well.
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1Yr
@theflyingsquirrel You can look at the spreads via extraetf. They are actually highest for the EM SC, around 0.6%. Perhaps one can say that then with all momentum figures this spread must be included? Anyway, I compared this once with the EM IMI and the EM SC is clearly better in the system even if you subtract 0.6% for each signal. If money flows into the EM SCs, then neatly, the trends last and are stable. In this respect, one can justify the costs. In the overall portfolio, I come to an average spread of about 0.15%. Makes with 5 signals per year max 0.75% performance loss. I find justifiable, if the model can bring 15%. Gladly we can discuss our strategies in detail, gladly also with @randomdude. But not here in the public space. Ideas?
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@Epi actually with me no, it also says on your profile page that you are holding 2 positions right now.
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