kmcintyre Elite    Posts: 890 Joined: 10/11/2012 Location: Portland, OR  User Profile | Nice work, Steve! Do you think results from testing two portfolios is sufficient to draw the conclusion that portfolio switching will improve results on most sets of portfolios? In most markets? Intuitively, portfolio switching makes sense provided the frequency of sampling the market is substantially higher than the frequency at which the market charges "personality". Corollary the Nyquist theorem. If the market changes personality faster than the portfolio switching algorithm can deal with, the results will be whipsaws leading to potentially worse performance than holding any single portfolio. The worst case is probably having the market change at the same frequency as the portfolio switcher samples. I'm not saying the sample frequency has to be 2x faster than the shortest market personality change, as Nyquist would imply. I don't believe the markets are sufficiently cyclical to firmly apply Nyquist. Even with Nyquist one has to pick a filter frequency above which cycles are simply ignored. So intuitively portfolio switching can be subject to the same whipsaws seen with moving average crossovers, or any other technical indicator. Pick the wrong sample frequency and I assert it can be harmful. Is monthly switching right for EOD traders? I like it. Probably right for monitoring quarterly changes. A good place to start... I ^REALLY^ applaud you bring statistical analysis to the table. I'm totally convinced that there is enough empirical evidence to warrant further investigation. I hope you get the tools required to make that task much less laborious. I think you too should be a research scientist for Nirvana! :-) Cheers! Keith | |
