Bond and equity return factors, multiplied by beta for BA (beta to QQQ) and AntiRD (to bond index), and SPYSTR factor.
- Bond factor applied to: TMF, the UBT (bond) part of SSOUBT, and AntiRD.
- Equity factor applied to: BullmktUSA, PLM, the SSO (equity) part of SSOUBT and BA.
Alpha factor: Assume 50% chance of 1/3 decline per year = 83.3% (5/6). Applied to MRC, BA, SPYSTR, TMFseas returns.
Testing return robustness
- No PLM or Bull mkt: Gave 21% GPR, 8% DD, 2.3 Sh. Allocation mainly goes to AntiRD and SPYSTR, 3% goes to low vol.
- Reduced MRC, PLM, Bullmkt and TMF by 5% p.a. and BA by 10% p.a from 2007-2020: I didn’t change the allocation, and left leverage at 180%.
- Those are the five largest systems and have 70% of the total allocation.
- Result: GPR: 18%, 11% DD, 1.8 Sharpe. Only 1 losing year, by 2% in 2018.