I get some of the same questions regularly- so when I do the site redesign I am going to include tabs for FAQs as well as timing updates. Those are the two main features people email me for.
Anything else you would like to see added to World Beta?
I was taking a look at an old post from about a year and a half ago that addressed the question of shorting instead of going to cash in the timing model. Normally, I recommend individual investors not short for a few reasons. 1 – most are not familiar with shorting. 2 – individuals do not get short rebates. 3 – the historical returns are lower than long/flat and buy and hold.
For the long short model the return is reduced with increases in volatility and drawdown vs. long/flat. Also not surprising – the correlation to buy and hold drops to 0 (or negative) for the L/S version.
However, if you include 2008, the disparity in performance is so wide between long/short and buy and hold (namely due to everything puking) , that buy and hold and the long short version now have similar return numbers.
If I get around to it I will include a long short section in my 2009 update to the timing paper in January. . .
I would be interested in your thoughts on why the long/short approach delivers inferior results to the long/flat approach. Aside from fees, etc. this seems counterintuitive. Would this also apply if you used relatively cheap instruments such as CFDs to hedge the long position when price falles below the 10 month moving average?
most likely because since most of the portfolio is stocks, they have an upside bias and they are not as trendy as other asset classes like commodities or currencies…
My thinking would be instead of a full short portfolio when under the 10 month ma, the shorting option would only be allowed in commodities, currencies and perhaps bonds as well, maintaining the rest of the portfolio on flat mode… since these 3 asset classes are more trendy due to supply and demand factors, maybe it would result in good numbers… i dont know
most likely because since most of the portfolio is stocks, they have an upside bias and they are not as trendy as other asset classes like commodities or currencies…
My thinking would be instead of a full short portfolio when under the 10 month ma, the shorting option would only be allowed in commodities, currencies and perhaps bonds as well, maintaining the rest of the portfolio on flat mode… since these 3 asset classes are more trendy due to supply and demand factors, maybe it would result in good numbers… i dont know