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Jim Dean

Posts: 3022

Joined: 9/21/2006
Location: L'ville, GA

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Subject : RE: Most Useful PortSim-Research Alloc Method
Posted : 8/30/2018 7:57 PM
Post #45291 - In reply to #45289

Hi Bill
For the record, my rant was not targeting your 122b post ;-) … solely serendipitous. There are hundreds and hundreds of other relevant posts and brochures.

Hi Steve
I agree that the PortSim curves are only useful for comparing alternative strats and methods, not for projecting actual likely returns.

Hi Mark
I was not trying to negate the value of PortSim or of equity curves - rather, I am trying to point out major methodological flaws and recommend using different allocation options.


I did fail to make one additional major point at the end of my earlier post (was tired of typing). That is - using compounded %Equity models over a multi-year period *hugely* biases the results for the most recent trades.

In my example I pointed out that 100k-1.5m took roughly the first 5 years, and the latter five years added $98.5m - effectively “squashing” the comparative performance differences between strategies related to the trades in the first half. And the last quarter of the test period is similarly hugely more influential than the third quarter of the period.

So - bottom line - the compounding effect makes the ten year test absurd per se. Doing a test over one or two years, as I stated at the beginning, with the same strategy and trade frequency, is not as much of a problem.

For the purposes of *comparing the relative merits* of different strategies or methods, a fixed dollars trade size is by far the best approach - it evens the playing field over time and gives each trade statistically the same influence as every other trade during the test period.

[Edited by Jim Dean on 9/1/2018 9:25 AM]

Deleting message 45291 : RE: Most Useful PortSim-Research Alloc Method

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