Steve Mayo Legend  Posts: 414 Joined: 10/11/2012 Location: Austin, TX  User Profile | Thanks for the suggestion, George. Hmm. Wouldn't that be better for the "Scoring" method instead? I'm basically asking what you would like to measure on the OUTPUT, that being the "switched" portolio's equity curve (a/k/a, the backtest). I don't think the recent slope of that equity curve would show if it is a good investment. We are planning to use most of the standard "indicators" like EMA, RSI, periodic return, etc. to score and rank portfolios to determine which one to switch to for the forthcoming month. There are hundred to thousands of possible permuations there. So, the evaluation function that I'm describing applies once you generate all those permutations. Obviously, we can't graph every one, so this evaluation function would be a way to sort the output table into something more reasonable. In that light, I think we would want something that evaluates the overall "goodness" of the resulting equity curves, probably something that balances risk and return like Sharpe or the others I listed, although some might just want the lowest possible volatility/risk or the highest possible return without regard to the other. | |
