I've talked at some length before about the question of fitting forecast weights, the weights you use to allocate risk amongst different signals used to trade a particular instrument. Generally I've concluded that there isn't much point wasting time on this, for example consider my previous post on the subject here. However it's an itch I keep wanting to scratch, and in particular there are three things I'd like to look at which I haven't considered before: I've generally used ALL my data history, weighted equally. But there are known examples of trading rules which just stop working du ..read more

Do you remember this post? https://qoppac.blogspot.com/2022/06/vol-targeting-cagr-race.html Here I introduced a performance metric, the best annualised compounding return at the optimal leverage level for that strategy. This is equivalent to finding the highest geometric return once a strategy is run at it's Kelly optimal leverage. I've since played with that idea a bit, for example in this more recent post amongst others I considered the implications of that if we have different tolerances for uncertainty and used bootstrapping of returns when optimising a stock and bond portfolio with l ..read more

@investingidiocy looking for my favorite statistics wonk to critique this. https://t.co/xWQMEl5LUU — bengraham (@bengraham) January 5, 2024 An old friend asking for help... how can I resist? Here is the perplexing paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4042239 And here is the (not that senstional) abstract: Bitcoin (BTC) returns exhibit pronounced positive skewness with a third central moment of approximately 150% per year. They are well characterized by a mixture of Normals distribution with one “normal” regime and a small probability of a “bliss” regime where the price ..read more

Optional Christmas themed introduction Twas the night before Christmas, and all through the house.... OK I can't be bothered. It was quiet, ok? Not a creature was stirring... literally nothing was moving basically. And then a fat guy in a red suit squeezed through the chimney, which is basically breaking and entering, and found a small child waiting for him (I know it sounds dodgy, but let's assume that Santa has been DBS checked*, you would hope so given that he spends the rest of December in close proximity to kids in shopping centres) * Non british people reading this blog, I could explain ..read more

 I'm sometimes asked where I get my ideas for new trading strategies from. The boring truth is I rarely test new trading strategies, and I mostly steal ideas when I feel in the mood. Today for example I saw this tweet post on twitter X: Think high market volatility leads to high returns? No. Periods with high market volatility are followed by high volatility, but not necessarily better returns. A volatility effect through time. Check out the graph below, based on the US equity market from 1927 to 2023. The… pic.twitter.com/23rrTwIf9O — Pim van Vliet (@paradoxinvestor) October 2 ..read more

 I haven't posted much recently because I've been busy with other stuff, and I only post when I feel like I have something to say (the advantages of not having a paid for subscription service!). But I was compelled to post by this tweet: CAPM doesn't work within asset classes, but it does do a decent job of explaining cross-asset class returns.https://t.co/y5beyDIh0j? pic.twitter.com/T7SDBkgoor — Dan Rasmussen (@verdadcap) September 25, 2023 Which links to this article: https://mailchi.mp/verdadcap/asset-class-capm ... which in turn generated a fair amount of heat and light, since ..read more

 I recently upgraded my live production system to include all the extra instruments I've added on recently. I also did a little consolidation of trading rules, simplifying things slightly by removing some rules that didn't really have much allocation, and adding a couple from my new book. As usual I set the instrument weights and forecast weights using my handcrafting methodology, which is basically a top down method that involves clustering things into groups in a hierarchical fasion. In my backtests I do this clustering using the correlation matrix as a guide, but for production we ..read more

 Here is part two of my annual review. Part one looked at my overall portfolio, including long only, but there was only a cursory look at my futures. Here in this second part I will be looking a my futures trading account in a lot more detail. It's important to say why I'm doing this. I'm certainly not doing it so I can upweight good strategies, and delete badly performing ones. A year of data on top of a 50 year backtest is meaningless. But it's interesting to know what did well or badly, whether my trading costs were higher than expected, how closely my live performance matches simulat ..read more

 A bit late this year, due to a confluence of holidays, book launches, university exam writing and various other things. Here lies within my performance for the UK tax year 2022-23. Previous years can be found here.  TLDR: Not great, absolute or relative. It was indeed a complete anus - horrible!. This will be a two parter this year. In this post I will look at my overall performance, with only a cursory look at my futures trading. In the second post I will focus on my futures trading. Overview  Investing: 1 UK stocks 2 Various stock ETFs 3 Various bond ETFs 4 A small amo ..read more

 Tommorrow marks the official release of my 4th book: Henceforth to be known as AFTS (I've had authors copies since the 24th February, but modern supply chains being what they are it takes considerably longer for the book to arrive in the hands of my readers; although plenty of people on twitter have been bragging about receiving their copies earlier). You can buy it here (why haven't you already!), or read about the detail a bit more here. It's my longest book so far, and in my personal opinion the best written as well (I feel like I'm getting better with practice!).  What I ..read more