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J
>
> I think CSI agrees that negative numbers can be a serious problem depending
> upon what traders are doing. Therefore, because of “the strong chance that
> an inflation-sensitive market could produce negative price quantities into
> the past” which “could discredit the accuracy” of the results, they offer a
> subset of adjusted contracts they call Proportional Back Adjusted (aka ratio
> adjusted). These are back- or -forward adjusted series that adjust “by
> increasing or decreasing successively further distant contracts by a
> percentage to raise or lower the entire history by the same proportion”
> instead of by the better known actual price difference between one contract
> and the prior older one. CSI says that “Proportionally adjusted series
> prepared through ratio multiplications cannot go negative, so there is never
> a need to elevate a series out of negative territory.” I have no experience
> with this method of adjusting. Would someone who has care to comment? How
> well does it work? How do your results differ (for better or worse) from
> other methods?
>
I don;t think that the solution for negative numbers is proportionally
adjusted contracts. This is a *different* type of result bec. it
changes the bar heights and distances betw. bars, unlike addition
adjusted contracts. As someone else suggested if your 20 yr back
adjusted contract goes negative, try 2 10 year contracts.
If you have to must have all the data in one file then, if negative
results are obtained after creating the cont. ctct., the program should
find the most negative number and add that value to the whole contract.
Thus the properties of "gap adjustment by addition/subtraction" are
maintained; (you just have had one extra addn/subtr). the only problem
with this is that current prices on the latest contract will not be
"real". For testing purposes that will not be a problem. You would
probably have to actually trade from the current contract. I don't
think this is a problem, but those who want to trade from the cont. ctct
as well would not like it.
Conrad Bowers
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