Dr. Wouter Keller’s tactical strategy “Bold Asset Allocation” (BAA)

[RobertMontgomery]

Would anyone like to help test this public strategy in Amibroker?

Dr. Wouter Keller’s tactical strategy “Bold Asset Allocation” (BAA) from his paper https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4166845

It’s a monthly strategy with back tested returns from 1970 to 2022 for two versions (Aggressive and Balanced).
Aggressive model: CAR 19.5%, MDD -14.5%
Balance model: CAR 14.5%, MDD -8.3%

The strategy starts at the close of the last trading day of the month.

1. Calculate 13612 Momentum for each asset in the canary universe (SPY, EFA, EEM and AGG) see momentum calc below.

2. Rank the Offense or Defense ETF lists below by relative momentum (today’s price divided by the average of the most recent 13 month-end prices) depending on which strategy is being traded.
Aggressive Offense list: QQQ, EEM, EFA, AGG
Balanced Offense list: SPY, QQQ, IWM, VGK, EWJ, EEM, VNQ, DBC, GLD, TLT, HYG, LQD
Defense list: TIP, DBC, BIL, IEF, TLT, LQD, AGG 

3. If all canary ETFs (SPY, EFA, EEM and AGG) have a momentum score > 1, then buy per the strategy being traded:
-If trading the aggressive model buy top 1 ETF from the aggressive list.
-If trading the balanced model buy top 6 ETFs from the balanced list. 

If one or all of the canary ETFs have momentum < 1 then select the top three ETFs from defense list.  4. Hold ETFs until the end of the month and repeat.   I’m not yet clear on how to code afl to use the ETFs vs. Index? IndexCode = ParamStr(“Index Symbol”,”$SPX”);Index = Foreign(IndexCode,”C”);
13612 SPY Momentum = (12*((Index/Ref(Index,-21))-1)) + (4*((Index/Ref(Index,-63))-1)) + MOMW3 = (2*((Index/Ref(Index,-126))-1)) + ((Index/Ref(Index,-252))-1); 

Relative momentum score = today’s price divided by the average of the most recent 13 month-end prices.

I’m curious how the canary universe concept could be used in place of an index filter for other strategies as it should move in and out a little faster.  Also how the defense list of ETFs would perform vs. holding cash in a monthly rotational strategy.

The original paper is attached for reference and error checking my summary.

Thank you in advance for any help putting this into afl.  

 

[JulianCohen]

Have you tried RealTest? on the RT forum there is discussion on this very topic, including a script Marsten wrote to test the strategy

https://forum.mhptrading.com/t/asset-rotation-vs-buy-n-hold/497/56

[LEONARDZIR]

Have you looked at Allocatesmartly? It is one the systems on their site. They have backtested results and you can follow and trade it in real-time.. Also a nice discussion about whether the system is overfitted.

[RobertMontgomery]

Thanks Julian, I ready through the real test discussion and did not see this aggressive variant in the mix. Overall most of the backtest results shared did not seem to wow anyone. I was curious of what would happen if the Offensive list was allowed to pick the top stocks from the NDX or R1000, etc., and testing the daily, weekly, monthly variants. I will have to learn real test to take advantage of those scripts shared.

[RobertMontgomery]

Hi Len, I did see it was available there also, just looking to see if there is a way to create an improved variant of the strategy. Also, curious how much the historical return benefit from the bull market in bonds that seems to be over now.

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