Sunday, August 28, 2011

BackTesting market timing

I have been involved with an investment club for several months and we are looking at how to manage a portfolio for greater return - I've been looking into market timing.

Here's one of the back test scenarios I just did...

One of the technical timing indicators in the book I read

This is the index:


Index goes up more than 3% from prior week => buy
Index goes down more than 3% from prior week => sell

So I downloaded some data, computed the weekly % change, and filtered that down to the weeks where a signal was given.

Picking IWM as an investment vehicle and using the next trading day after the signal and using the closing price of that day, I did some backtesting in Excel.

From Jan 2010 thru July 2011, the model returned 98% (~ 5.14% / month) and only 10 trades over that time period.  Vs just holding IWM which gained 36% over that period.

Here are the trades:

Very enlightening....

Toby

(only weeks where the % change was > 3 are shown)

Date
 Adj Close
PercentChange
Signal
Date
Price
Action
Shares
 Balance
week signal given
from prior week
next trading day
closing price that day
IWM
1/11/2010
     2,323.96
-3.37%
yes
 $  100,000.00
2/8/2010
     2,228.42
3.45%
yes
02/15/10
61.02
Buy
1638.81
 $                   -  
2/22/2010
     2,296.04
5.18%
yes
4/12/2010
     2,593.19
3.55%
yes
4/19/2010
     2,685.27
-3.16%
yes
04/26/10
73.85
Sell
1638.81
 $  121,025.89
4/26/2010
     2,600.48
-8.12%
yes
5/3/2010
     2,389.20
4.68%
yes
05/10/10
69.03
Buy
1753.24
 $                   -  
5/10/2010
     2,501.02
-5.50%
yes
05/17/10
69.69
Sell
1753.24
 $  122,183.03
5/24/2010
     2,400.48
-3.58%
yes
6/14/2010
     2,427.72
-3.57%
yes
6/21/2010
     2,341.16
-6.32%
yes
6/28/2010
     2,193.31
5.43%
yes
07/06/10
59.04
Buy
2069.50
 $                   -  
7/12/2010
     2,269.35
5.77%
yes
8/2/2010
     2,418.64
-5.41%
yes
08/09/10
65.86
Sell
2069.50
 $  136,296.99
8/23/2010
     2,289.45
4.38%
yes
08/30/10
60.30
Buy
2260.31
 $                   -  
10/25/2010
     2,601.09
4.14%
yes
11/22/2010
     2,679.79
3.26%
yes
3/14/2011
     2,909.27
3.29%
yes
5/23/2011
     3,055.27
-3.01%
yes
05/31/11
84.84
Sell
2260.31
 $  191,765.12
5/31/2011
     2,963.43
-3.35%
yes
6/20/2011
     2,909.42
5.36%
yes
06/27/11
80.56
Buy
2380.40
 $                   -  
7/18/2011
     3,049.54
-4.83%
yes
07/25/11
83.06
Sell
 $  197,716.02
7/25/2011
     2,902.31
-9.62%
yes
8/8/2011
     2,570.62
-6.28%
yes
8/15/2011
     2,409.30
-6.28%
yes
8/22/2011
     2,548.16
5.76%
yes
Buy




posted by toby at 3:52 PM | 0 Comments