One of the benefits of writing a blog – readers from around the world take your research, verify/disprove it, improve it, and take it in new directions. Thanks to PC for the following charts. Monthly data (and from the looks of it excludes Tbill yield when sitting in cash).
Andrew Bary writes a Barron’s cover article on the endowments and no mention of They Ivy Portfolio? Shame on you Andrew.
Could you provide a little more background/methodology on the system that the chart shows? Thanks for your great work!
PS – I'm still looking for a t-shirt or something from Mebane, NC…
Tommy,
The chart is showing an investment strategy based on the industrial sectors of DJStoxx600.
As in the method suggested by Mebane, the best sector resp. the 3 best sectors are selected at the end of each month based on the average of their 3/6/12 months perf.
The portfolio is then invested in the ETF's of each 1 resp 3 industrial sectors and monthly rebalanced.
The hedge is provided by refraining from investing or cutting positions when the level of the DJStoxx600 is below its 60 weeks MA.
Pierre
Thanks for the description Pierre!
Pierre
Thanks from me too.
Any chance of reproducing the charts & table using the 10 month moving average [or weekly equivalent] – just to keep things consistant, and reduce the likelyhood of inadvertant backfitting ?
Paul
Paul,
I just sent a file to Mebane with the 10 months MA, so that he can post it. Looks a little bit less attractive.
Cheers,
Pierre
Is there anywhere we can see the data leading to the chart, esp. each individual asset (or the three assets) that would be held in this model each month?
I downloaded the data related to each and every industrial sector from the following web site :
http://www.stoxx.com/indices/bytype.html?type1=...
I only took the series named DJ Stoxx 600 and excluded the two series related to real estate.
Let me rephrase the question Pierre: can I see your spreadsheet. This would actually help in two ways.
I'm curious how you built it (I have done a few on my own and have some incredibly cumbersome AND statements that I wonder if folks have found more elegant solutions for) as well as simply ease my curiosity of what each month looks like holding wise.
No much technical difficulties.
I have the average performance for each sector copied into 18 colums, one per sector, CA to CR (columns A to BZ are used to calculate each sectors performance for 3/6/12 months and average).
Then I evaluate the best performance, with the “large” function of Excel, and this gives me in columns CS to CU the values of the 1st, 2nd and 3rd best performance.
So in CSi, I have =LARGE(CAi:CRi;1), in CTi =LARGE(CAi:CRi;2) etc…
where i represents the number of the row.
Then I use an Excel matrix formula to return the number of the column, which I have entered into cells CA1 to CR1 : the formula for retrieving the number of the best performer in CVi is
=OFFSET($CA$1;0;MAX(($CAi:$CRi=CSi)*(COLUMN($CAi:$CRi)))-COLUMN($CA$1))
You need to enter this formula with CTRL-SHIFT because this is a matrix formula.
You then need to increment CS to CT for the second best performer and to CU for the third.
You will then have the ordinal number of the 3 best performers for line i in CVi to CXi.
That's it.
BTW the tip for the matrix formula is available from specialized Excel forums on the web.
Hope this helps.
Ha! No much technical indeed. You have arrived at that far side of complexity that Oliver Wendell Homes used to speak of (“I would not give a fig for the simplicity this side of complexity, but I would give my life for the simplicity on the other side of complexity.” – Oliver Wendell Holmes).
Your explanation would be helpful to someone who knew excel better than I, but it leads me to a certain point and then stumps me. I'd love to get a copy of the spreadsheet if you were willing. It would make a lot more sense to me!
Without being an expert, I have tried the formulas given by Pierre and it works fine. As Pierre explained: set columns for the prices of the Stoxx 600 sectors, then set columns for the 3m/6m/12m returns for each sector, then set columns for the average, then use Pierre's formulas. It takes some time and the results I obtain are close to his.
Thanks Pierre.
Zumila
Without being an expert, I have tried the formulas given by Pierre and it works fine. As Pierre explained: set columns for the prices of the Stoxx 600 sectors, then set columns for the 3m/6m/12m returns for each sector, then set columns for the average, then use Pierre's formulas. It takes some time and the results I obtain are close to his.
Thanks Pierre.
Zumila