[R-SIG-Finance] [R-sig-finance] rmetrics portfolio backtesting limitations question

[tradenet]

Thank you Spencer.  I'll proceed according to your suggestions.

Regards,

Andrew


spencerg wrote:
> 
> Hello, Andrew: 
> 
> 
>       I'm not familiar with either "portfolioBacktest" nor 
> "setWindowsHorizon".  Moreover, using RSiteSearch produced nothing for 
> either.  You might get more help from this list if you don't require 
> respondents to understand these terms. 
> 
> 
>       Have you considered using the "debug" function to walk through 
> code line by line, looking at what it does, changing things at will?  
> You can often learn enough doing this to see what you need to do to get 
> it to do what you want, provided there is enough information in the 
> data.  By doing this, you should be able to get the weights outputted in 
> many different ways. 
> 
> 
>       However, I'd look carefully at any algorithms that produced 
> distinct portfolio weights for many assets.  As a check, I suggest you 
> compute "eigen" of "corr" on your favorite 50 assets and look at 
> "eigen(...)$values".  If the smallest eigenvalue exceeds, say, 0.0001 
> times the largest, you are probably OK.  Otherwise, your use of 
> individually estimated weights could be worse than using constant 
> weights. In particular, if you have fewer than 50 observations, the 
> smallest eigenvalue may be negative, which says that that portion of the 
> variability, and probably more than that, is driven by round-off error.  
> I'd rather not base investment decisions on round-off. 
> 
> 
>       Hope this helps. 
>       Spencer Graves
> p.s.  Are you aware that you can get the source code for any CRAN 
> package?  For example, the source for the "timeDate" package is 
> available in a file "timeDate_290.85.tar.gz" downloadable from 
> "http://cran.fhcrc.org/web/packages/timeDate/index.html".  If the people 
> who wrote a particular functions included comments in their code, they 
> will appear in the *.tar.gz file but not in the version you get by 
> typing the function name. 
> 
> 
> tradenet wrote:
>> I have been working with the portfolioBacktesting function in Rmetrics
>> and it
>> seems to be a very powerful and useful function.  There seems to be some
>> limitations/bugs that seriously limits the utility of the function and I
>> was
>> hoping someone has found workarounds:
>>
>> 1.) If I specify a large number of assets, say 50, in the formula, e.g.
>> SPX
>> ~ asset1 + asset2....+asset50
>> then it seems only the first 29 assets are used in the analysis. 
>> ncol(backtestPortfolios$weights) always returns 29 and assets near the
>> end
>> of the list get nonzero weights if I move their names to the beginning of
>> the formula string, otherwise those assets do not appear in the results. 
>> Is
>> there a way to NOT compare results to a benchmark?  I'd like to just
>> supply
>> a timeseries of asset returns for a date range and run the analysis using
>> all assets in the timeseries as portfolio candidates.
>>
>> BTW, if anyone knows an easy way to dump out the weights to a file I'd
>> appreciate the insight
>>
>> 2.) the 12m window horizon seems to be the only one that works:
>> setWindowsHorizon(backtestBT)<-"12m" works, but <-"3m" yields an error
>> message.
>>
>> I thought this might have to do with the lambda smoothing, so I set the
>> smoothing to "1m" and still no go
>>
>> 3.) does anyone know how to turn smoothing completely off?  I would like
>> to
>> see the raw, unsmoothed weights
>>
>> 4.) is there anyway to plot the results without performing weight
>> smoothing
>> -- I don't want to have to do smoothing to look at all the great plots
>> and
>> results.
>>
>> Rmetrics is great stuff, so close to being beyond perfect!  I am very
>> grateful to the developers and the community.
>>
>> Warm regards,
>>
>> Andrew
>>
> 
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