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The performance figures I quoted weren't risk-adjusted, or annualized-
out from returns made during parts of a year. They were absolute.
Nobody has to do any research on anyone else's findings. Anyone with
Metastock and data can easily determine in moments the seasonal
biases in the stock market.
It's not necessary to re-think Bernstein's ideas, because they're
excellent. He champions the idea that indexing can outperform almost
any method of actively managing money, and comparing trading systems
against appropriate benchmarks proves that he's got a point.
Also, he didn't mislead you. His asset-allocation models have
diversification among a variety of asset classes, reducing volatility
and performance. The performance figures I offered were for
individual asset classes, small-cap value, large-cap blend and large-
cap growth. Not an apples-to-apples comparison.
You don't care for having someone point out that what you do can be
easily duplicated by simpler means? I can appreciate that it's not a
pleasant thing to hear, and that it may not even be true. At the
same time, I hope that you can appreciate my displeasure when I see
impressionable newbies exposed to concepts that aren't necessarily
valid, even though they're presented as though they were Gospel.:)
Luck,
Sebastian
--- In equismetastock@xxxxxxxxxxxxxxx, superfragalist <no_reply@xxxx>
wrote:
> I used the 10% figure as a hypothetical example. It's not the
return I
> get from my systems, or the return any of the other systems
developers
> I was refering to normally average.
>
> For the sake of discussion, I didn't think it necessary to publish
> actual trading returns, but that a simple example would do for
> purposes of illustrating how much good money management techiques
can
> improve a return.
>
> I can see I was mistaken in thinking a hypothetical example would be
> good enough for discussion.
>
> In March 2005 issue of Futures magazine they did an article
discussing
> the trading results of the top traders for 2004. They had two groups
> separated by the amount of capital they manage. Over five years,
only
> a couple of them in either group averaged more than 31.74%. I'm in
the
> second group and until I read your comments I was was very pleased
> with my annual performance compared to my peers. However, after your
> explanation I'm giving up trading altogether. There is no reason to
do
> it.
>
> While I am aware of the seasonal bias, on a risk adjusted basis,
your
> 31.74% average return over, I believe, 10 years while being in the
> market only six months per year is better than I can do in six
months.
> I've read a lot of seasonal data studies, including a number of them
> done by Yale Hirsch, and I don't remember that kind of return, but
> I've probably overlooked something.
>
> Even though I don't trade with complex algorithms, mostly just price
> and volume, I'm wasting my time.
>
> I thought the best buy and hold book I had read was William
> Bernstein's The Four Pillars Investing. I'm gong to rethink what I
> learned from him. In his first book, The Intelligent Asset
Allocator,
> he did a fairly rigorous mathematical analysis of LTBH, and didn't
> reach the same conclusions that you have. His asset allocation
models
> only yielded around 11% over the long term. Based on what you are
> saying, he, unfortunately, has mislead me substantially. I will
> correct that.
>
> I will apply myself more dilligently to the seasonal data, and find
> away to use it to achieve the results you've quoted with only one
> round trip per year.
>
> I suggest others do the same. You have not killed my joy, you've
only
> blown it up beyond my expectations with the possibilites I can now
see
> ahead of me. My eyes have been opened.
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