Your returns look like you have an outstanding approach. Has it worked well in less volatile times? Is it accomplished with out-of-sample application?

I am interested .. to understand more details about . . "Alpha strategy with Market Timing, Sector Rotation " . . .today i have seen a test live witch make me thinking about random trading . .it was astonishing. . @aurel

@R Buck Gray - thank you for the kind words.

The model portfolio covers the June 2014 to present time period and includes volatility levels ranging from 6.5% to 14%, depending on your sample period and size. This would typically be considered a low volatility environment – the long run average for the S&P 500 is in the low teens (whether you measure using implied or historical approaches). The recent increase in volatility levels has increased the shorter term volatility estimates for the S&P 500 – you can look to either shorten your sample period or look to the short end of the implied volatility surface for confirmation. The increased volatility is very much welcomed, as the strategy is meant to capitalize on increased periods of volatility - you are beginning to witness this with the increase in positive correlation between the model portfolio’s return distribution and market volatility.

Could you kindly elaborate on your second question?

If I did understand your question correctly, I would say that the strategy does not look to forecast for out-of-sample periods or estimates. The strategy’s expected return is a function of the market’s volatility, however the strategy makes no attempts to estimate what that future market volatility level will be.

If you have any other questions, please let me know.

Antonio

Antonio - I have seen approaches that did well in the 2012 - 2014 period but have not been profitable in 2015. If your approach has done well in 2012 - 2014 as well as your returns in 2015, it would appear that you are doing exceedingly well in tame and wild markets. You should be the advisor of the decade. - Buck

@Buck – I agree with your assessment regarding the various time periods and would argue that most strategy/model developers focus on incorrect factors (generalized term). Typically, different strategies are developed to capitalize on different market factors and thus out/under perform in different market environments. The ideal approach would be to diversify across different strategies and construct your portfolio accordingly (i.e. tailored to your risk tolerance), but this requires discipline and more of a focus on portfolio construction.

At the conceptual level, idiosyncratic and market risk can be addressed at trade and portfolio (policy) levels. Based on my experience I believe that more attention is given to trade level risk/return (i.e. what security they’re trading) rather than portfolio level dynamics (i.e. correlation between portfolio holdings).

Advisor of the decade? I have been around long enough to understand that the market has a way of humbling even the best investors :-) Two of the most consistent traits that I have found amongst successful investors/traders is discipline and consistency in their approach.

Antonio

@aurel – is there something specific that you would like more information on?

Random trading? I would venture to guess that the underlying assumption is that markets follow a random walk or Markov process. In my experience, this type of trading is more popular in the derivative space with hedging playing a large role. In my opinion, this highly specialized trading with large institutions dominating the space. Personally, I would not attempt to compete against these firms – they have the resources (information, human capital, infrastructure, etc.) that few can match. I favour a more level playing field.

The STERS Model Portfolio is based on the assumption that over a given period of time (time being the key variable), an investor is able to consistently capitalize on market “irrationality” (i.e. excess volatility, market over-extensions, poor market structure, etc.) and thereby create a portfolio that will consistently deliver a given level or risk and return. Conceptually straightforward but difficult in practice.

Antonio

Thanks Antonio for reply

.. resources I have ..i can develop ..and i can test any software on my 4X20.000 GPU Core / computers .. I need more time to study .. regarding your system -- is available to trade / see / buy ?

@aurel

@aurel - I will be posting holding based analysis at the portfolio and sector levels tomorrow, along with some high level portfolio characteristics. It should provide more clarity around the market timing and sector rotation (focus on the portfolio's capital allocation during volatile market and sector environments) and note the contrarian nature of the strategy.

Kindly send me a PM and we can discuss other details.

Antonio

Ok Thanks

I am interested to see details..