Table 1.1
Hypothetical Test Results
Profit &
Risk Comparison--Worldwide System 1.1 vs.
Benchmarks
4.5 Years from June 28, 2002 to
December 8, 2006
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|
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|
worst |
reward |
|
|
|
Benchmarks |
start |
end |
total |
|
draw |
to risk |
std |
trades |
|
/ System |
value |
value |
%gain |
%/year |
down% |
ratio* |
dev |
/year |
|
DJ-30 |
9243 |
12307 |
33.2 |
6.7 |
-20.7 |
2 |
8.4 |
-- |
|
SP500 |
990 |
1410 |
42.4 |
12.7 |
-20.8 |
2 |
8.0 |
-- |
|
RUT-X |
463 |
793 |
71.3 |
12.9 |
-25.0 |
3 |
15.6 |
-- |
|
NDX |
1051 |
1786 |
69.9 |
8.3 |
-23.0 |
3 |
16.3 |
-- |
|
System no timing |
100 |
296 |
195.6 |
27.6 |
-16.9 |
12 |
17.7 |
11.2 |
|
System +timing |
100 |
360 |
260.0 |
33.4 |
-16.9 |
15 |
15.6 |
17.3 |
TABLE NOTES
|
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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|
|
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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.
When the market trend is up,
System +timing means
hold the two
top-ranked funds. When the trend is down, hold
cash.
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, of course, familiar
indexes. The Dow-Jones Industrials,
Standard
& Poor's 500 Common Stocks, NASDAQ 100, and
the Russell 2000 Index.
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 1.1 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 1.1 has
been modified to increase tempo. It is not
essential. You can see that you still get
superior results without it.
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--3PORTF/24ETWORK IM276
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© 2006-07 The 2000 Corporation.
All
Rights Reserved.
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