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Having perfect foresight 5 years in future and constantly rebalancing the portfolio means that the portfolio will never match the perfect foresight. It would in
by Nokinside 9y ago
Having perfect foresight 5 years in future and constantly rebalancing the portfolio means that the portfolio will never match the perfect foresight. It would invalidate the point that article is making.
That kind of strategy could lose money related to index if five year prediction and business cycles cancel each other (think counterphase signal).
It would be very interesting to see simulation of perfect foresight rebalancing strategy in different timefrimes.
- Bartweiss 9y agoYep, the 5 year window seems reasonable, but starting from a single point doesn't. It'd be very interesting to see a breakdown of when 'god' would be fired for each of the possible starting points.
- Nokinside 9y agoAgreed. Simulating with sliding window over longer period would tell how the perfect foresight strategy performs. Now it's just single probably hand picked data point.
- deleted 9y ago[deleted]
- roymurdock 9y agofrom the author: "1yr look ahead, rebalance each year? Yes. We also looked at monthly. If you shorten the horizon the returns get silly and the drawdowns go down. At 1yr you can still hit 20%+ dd. At monthly you become a trillionaire with essentially no risk"