kmcintyre Elite    Posts: 890 Joined: 10/11/2012 Location: Portland, OR  User Profile | Pete, I do not believe that simply reducing the rebalance "Interval" to daily or weekly will reduce the dispersion in returns. I think having multiple DPs, each with differing rebalance dates, would cause the Account containing the DPs to have a more predictable, consistent return. Mel, There are a few clear "outliers" in the PW/EF performance data. But that is real world. I don't want to ignore them. (In fact, I want to fully understand and embrace them.) Yes, I think what I am doing is a type of Monte Carlo analysis. Shifting the simulation date by one day allows be to collect data on many runs over essentially the same input data. What I'm measuring is the noise (randomness) of the algorithm - for the most part. Some variation comes from the calendar -> trading day transform. (Some runs are a little longer than others as measured in trading days.) Some variation comes from the price delta of the days that are not shared between runs. But the lions share of dispersion comes from the trading algorithm. And since I keep all Account settings, strategies, EFs, and PW settings constant, the dispersion is attributable to 1) the random walk of the markets and 2) the noise injected by ECA and the EFs. And a little noise can become a roar if the amplifier gain is large. Small changes in strategy selection get locked in for a month, then leverage further amplifies the noise, then compounding propagates the noise into future months, almost like a feedback loop. So each rebalance adds new noise while the old noise feeds back in amplified form. Back to the slot machine metaphor. Slot machines are designed to generate pseudo random results over the short run, but totally predictable returns over the long run. A casino manages the short-term risk by loading up on slot machines. Over a large pool of slot machines, the house gets much more predictable returns. I want to be the house. Keith | |
