User 343684

Timing Model Returns for 2008

Mr. Faber,

I have also discovered that using the 200EMA is an excellent tool for timing entries or exits for someone using the Yale portfolio allocation. My backtesting using index funds goes back to 1996. I created another one using ETFs that goes back to 2003. My backtesting does take into account maint, trading fees & dividends. The margin cost is not taken into account since I do not have exact figures yet. What's a reasonable % to use? That will make the results more accurate.

In any case, my entry/exit rules are slightly different from yours but I still use the 200EMA on monthly prices:

The backtesting yielded the following results:

Using index funds and 50% margin:
Annualized gain: 12.45%
Total gain: 172%
Worst drawdown: -0.91%
Worst loss: -0.77%
Total months: 100
Winning trades: 14
Losing trades: 5
Longest trade: 56 months
Shortest trade: 1 month

Using ETFs with 50% margin:
Annualized gain: 15.70%
Total gain: 126.92%
Worst drawdown: -0.36%
Worst loss: -0.37%
Total months: 66
Winning trades: 8
Losing trades: 3
Longest trade: 56 months
Shortest trade: 1 month

The drawdown is computed using closed trades and not the market's daily volatility. In other words, once a trade was closed, I took last peak in equity and computed its drop caused by the closed trade. The same applies to the "worst loss" field. This part of the research needs improvement.

Margin could be bumped to 100% w/o incurring a huge loss since the 200EMA works quite well in the Yale portfolio. In such a case the worst loss was 1% & 0.40% and the ann. gains were 15% & 19.46% respectively.

Sincerely,