am usually no big fan of arithmetic mean of returns as it is a flawed indicator of profitability. A Practical Application, to illustrate the concept, we can look at a back-test and apply the bootstrap method to its daily return series. The 10,000 resamples all pick at random, with replacement, 5120 observations from the zero-centered, adjusted returns. (Aronson covers the basics of statistical analysis earlier in the book. The following chart illustrates such a portfolio for the ftse 100 Index since 1995. The following chart shows the max drawdown values for the 14 smats portfolios and the ftse 100 Index. From smats(4) to smats(16). This trading system is well-known in the US, what we will look at here is:.
Here the smats(10) portfolio only had a middling relative score. As mentioned in the Evidence-based Technical Analysis review post, the main value of the book lies in the presentation of the two methods allowing for computing the statistical significance of trading strategy results, despite having a single sample of data: Both methods solve the problem.
In particular, the products and services referred forex translators required to herein are not available.S. Max Drawdown Maximum Drawdown decribes the maximum loss a portfolio suffered from a previous high value. Not surprisingly the ftse 100 had the highest volatility. In the bootstrap method, rejecting the null hypothesis occurs when the mean arithmetic return is statistically significantly positive. Whether 10 months is the optimum parameter for the moving average (or would a 5-month, or 15-month, moving average produce superior results)? In Aronsons book, benchmarking is achieved by detrending the data. OK, its possible that this isnt absolutely the simplest trading system imaginable, but apart from buy and hold it is unlikely there are many systems much simpler than this one!