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Steve Mayo

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Joined: 10/11/2012
Location: Austin, TX

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Subject : RE: OV Account Analysis Tool
Posted : 4/21/2015 9:51 PM
Post #35030 - In reply to #35029

I suspect our approach is not that different We all want maximum return for minimum risk. One can always leverage up the return by putting more money at risk. The trick is to increase return without a commensurate increase in risk, the vaulted "Alpha" (portfolio return:risk above market risk) that every portfolio manager seeks.

In OV, the only (readily-available) measure we have of that return:risk relationship is Calmar (CAR/MDD) (return above portfolio risk only). The problem, as you described well, is that it is hard to trust those metrics when they can change dramatically with only a minor settings tweak or a slight change in start/end date. Your approach of looking at consistency of periodic segments is certainly better, but it still has the problem where portfolio return:risk changes dramatically once you start hitting the equity ceiling.

I'm essentially doing the same thing, but I use much smaller "periods" and I don't assume they will occur in the same sequence or even that all of them will occur every time. It doesn't entirely fix the equity ceiling problem per se, but it does give a much better estimate of what the is true overall portfolio performance.

Once I get version 2 finished, I'll try to better explain the concept. :-)


Deleting message 35030 : RE: OV Account Analysis Tool


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