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Rich B
(@copernicus)
Member Admin
Joined: 1 year ago
Posts: 201
07/11/2019 6:29 pm  

For any members who may be Brisbane or Gold Coast based, Fred and Rich are presenting at a full day workshop and showcasing the secret sauce of Diversified Systematic Price Following magic.

Visitors are welcome. First visit free, subsequent visits $40.

More details here:

Cheers Guys

Hope to see any South East Queensland locals there.

Rich

 

 

 

Quidquid latine dictum, altum videtur


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Rich B
(@copernicus)
Member Admin
Joined: 1 year ago
Posts: 201
10/11/2019 10:06 am  

Fred and I had a great day yesterday presenting the ATS method to the Brisbane Chapter of the ATAA. We had some very smart cookies there who asked lots of great questions.

Here are a couple of questions that had me on the back foot which I couldn't immediately answer.

Question 1

"We use the ratio MAR a lot as a risk adjusted metric to compare performance of different return streams over the same testing period so what does MAR mean?" 

Well that actually had me scratching my head.....'what does it stand for?'

Well it actually stands for Managed Account Reports Ratio

http://www.futuresknowledge.com/dictionary/mar-ratio/

....who woulda thunk it?.....and here I was thinking it had some mathematical definition 🙂

 

Question 2

A second more curly question was posed by an expert in statistics......this is when I got nervous. Here goes.

I showcased a monthly performance chart of the TF Index 37 against the monthly performance chart of the S&P500TR Index as a demonstration of the adverse volatility that lies in a buy and hold approach to trading.

Now I wasn't expecting some cluey audience members to actually add up columns so quickly....but here was the question that had me reaching for my emergency aspirator.

"The total annual returns of the S&P500TR performance report ARE HIGHER than the total performance returns of the TF Global 37 Index.  So why do you say the TF Global Index outperformed the S&P500TR series."

To tell you the truth.....I had never looked at the problem this way. I stumbled and mumbled around with a few possible reasons...including that it is better in a risk adjusted sense (being less volatile).........but it did have me head scratching until I got home and then looked at it more deeply.

The answer does relate to looking at things from a Risk-Adjusted perspective as it really is the $ returns at the end of the exercise that matters.....not the total % returns.....and this is because of the compounding effect over a return series.

Have a look at this.

If I had invested $1 in the TF Global Index 37 in 2000.....then that $1 dollar will have grown to $3.84 at the end of 2019. If I had invested $1 into a buy and hold on the S&P500TR INdex in 2000, then that $1 invested would have grown to only $3.14 at the end of 2019. This is despite the fact that total % returns for the S&P500 TR Index were actually slightly higher than the TF Global Index 37.......and here is the why?

The effect of compounding produces better results over less volatile return series. This is because it is far harder to recover your equity from a steeper drawdown than one with a shallower drawdown. The compounding effect is 'timing' related to when you do the compounding. A return series that is less volatile and is regularly compounded say at annual intervals produces a far higher overall equity balance. This is because the compounding effect is additive in nature over a return series. If you enter a very large drawdown sometime over the return series....the far lower equity base produces a far more diluted compounding effect to the return series than a return series with a lower drawdown where the additive effect of compounding is far more consistently applied across the time series.

This is why a risk adjusted approach to viewing things is far better than a mere look at things from the perspective of total returns of the series. CAGR is actually a risk adjusted metric....rather than say simple monthly returns which are not.

This is the presentation slide I should have put up to avoid that question.

Cheers guys

Rich

 

 

 

 

 

 

 

This post was modified 4 weeks ago 3 times by Rich B

Quidquid latine dictum, altum videtur


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burrup.lambert
(@burrup-lambert)
Eminent Member PREMIUM MEMBER
Joined: 2 months ago
Posts: 24
10/11/2019 11:40 am  

@copernicus

I'm unable to view the attachments Rich. Any chance you can embed them?


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Rich B
(@copernicus)
Member Admin
Joined: 1 year ago
Posts: 201
10/11/2019 12:08 pm  

Hi B

Give this a shot. 🙂

 

 

This post was modified 4 weeks ago 2 times by Rich B

Quidquid latine dictum, altum videtur


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burrup.lambert
(@burrup-lambert)
Eminent Member PREMIUM MEMBER
Joined: 2 months ago
Posts: 24
12/11/2019 9:57 am  

Thanks Rich!


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