kmcintyre Elite    Posts: 890 Joined: 10/11/2012 Location: Portland, OR  User Profile | You are correct in sighting that LR would not be a great tool for determining the trend between 2007-2009. But I think the issue is not with LR, but the fact that there was no single trend to be determined between 2007 and 2009. LR analysis would be very useful in determining that the trend was changing from a strong downtrend to an strong uptrend. The LR slope changed radically during that period. The problem you have sighted is due to sample rate, which I have pointed out in a previous post (Nyquist theorem...) You can't detect a two year trend with a sample rate of two years. Antialiasing occurs. [KCM - put another way, one can't determine what happened during a cycle with a 2 year period by sampling at a rate of 2 years. If one wants to detect 2 year cycles a minimum sample rate would be 1 year. That would not provide much resolution, but would capture the U trajectory the market took at a very gross level.] Anyway, my preference is to use LR slope verses a point-to-point measure such as CAR or % change. Looking forward to Portfolio Switching. Sounds very powerful! Cheers Keith [Edited by kmcintyre on 4/13/2014 11:39 PM] | |
