Table 1.0
Hypothetical Test Results
Profit & Risk Comparison--Mostly USA System 1.0 vs. Benchmarks
4.6 Years from April 12, 2002 to November 10, 2006
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worst |
reward |
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|
start |
end |
total |
|
draw |
to risk |
std |
trades |
|
Benchmarks/System |
value |
value |
%gain |
%/year |
down% |
ratio* |
dev |
/year |
|
DIA |
102 |
121 |
18.7 |
3.8 |
-25.5 |
1 |
9.8 |
-- |
|
SPY |
111 |
138 |
24.1 |
4.8 |
-33.0 |
1 |
9.7 |
-- |
|
IWM |
51 |
77 |
49.3 |
9.1 |
-39.3 |
1 |
17.8 |
-- |
|
QQQQ |
34 |
43 |
28.4 |
5.6 |
-27.5 |
1 |
17.2 |
-- |
|
System +timing |
100 |
254 |
153.6 |
22.5 |
-9.8 |
16 |
20.8 |
8.5 |
|
System B/Sshrt+timing |
100 |
403 |
302.6 |
35.5 |
-25.5 |
12 |
17.8 |
12.9 |
TABLE NOTES
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Table is prices only, no margin,
dividends, interest, or expenses.
All calculations are based on closing weekly valuations.
Hypothetical means that the numbers in
the bottom two rows
did not occur at the
same time as the numbers in the top four rows.
All the numbers are 'real', that is, they
actually happened.
The lower set just
happened later.
They represent how things
could have worked out
had they had been
applied at the same time as the upper set.
Other factors, including the system itself
had it existed and been in common use,
may
have affected results adversely (or
beneficially).
The table does not foretell
the future.
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* total % gain/worst drawdown
This is
the 'Copernicus
Factor'. It measures the best thing that
happened
vs. the worst thing that happened
during the entire course of this trading period.
It is the best comprehensive metric of the
relationship
of investment risk and reward.
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Drawdown is the largest price decline
from the highest price after purchase
before the next new high.
It is not a realized loss but can create great mental stress.
Modified Sharpe Ratio. By
dividing the column 'compnd%/year'
by the
column std dev (standard deviation), you
will get the equivalent
Sharpe Ratio without
the adjustments for the Treasury Bill rate.
These are extraordinarily good numbers.
The whole table tells you clearly
that if you own stocks or their derivatives,
you will go through periods when you will
'lose' money. It is law, like the law
of
Gravity. The second thing the the table tells
you is that you can be
very well paid for
your mental stress.
The first four items are the tracking ETFs for four comprehensive indexes,
the Dow-Jones Industrials (DIA), Standard & Poor's 500 Common Stocks (SPY),
NASDAQ 100 (QQQQ), and the Russell 2000 Index (IWM).
They are benchmarks of comparison,
bought and held, with no trades.
This table best compares with the original
table from the
initial version of the system.
Take a look.
Remember always the
probability of a drawdown.
Expect it. Be not
surprised when it arrives.
If that bothers
you, you should not invest.
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Comments. Doesn't
it bother you that the test period is
short? Well, yes, it would, but for the fact
that the central process in this version 1.0 of
the system is identical to the central process
in previous tests dating back to 1986. The
central process is the method of sorting and
ranking portfolios, based on weekly Friday
closing prices alone. The smoothing and momentum
constants have not been changed. You may find
the earlier commentary helpful click
here. The timing factor in Version 1.0 has been modified to decrease tempo. It is not essential. You can see that you still get superior results without it.
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DATA/3PORTF/ARCH/ETFs weekly/ET_STEP1 FM542
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