Acceptable Max DD?

DT-waw · Feb 19, 2003

Once again I'll refer to http://www.managedinvestments.com/performance.html 12-year Managed Futures data. These funds made ~ 900% on average in this period. That's +1.6% /month. What's the possibility of having substantial monthly drawdown with a portfolio of 30 funds? - each one makes +1.6% /month on average. I think it's pretty low.

I agree that it's important to know and understand fund's strategy, just like company's fundamentals, finance & management in stocks investing.

swingwaver · Feb 20, 2003

I want to learn more strategies,
Do anyone know good web site to learn trading system?

I want to read more easylanguage code.
If you know, please tell me.

vladiator · Feb 25, 2003

Quote from DT-waw:

You know, there are 3 kinds of lies:, lies, damned lies and statistics.
vladiator will tell you something like: "there're no proofs that market is not efficient"

Close but not exactly.

There are plenty of spotty and sketchy pieces of evidence that show a pocket of inefficiency here or there. They don't constitute proofs though as long as there is no unifying theory that explains them all.
Having said that, I actually read a working paper that proposed an alternative to EMH, called Incomplete Revelations Hypothesis based largely on Grossman and Stiglitz's work and noisy rational equilibrium models. It sort of attempts to do just that but is still lacking in many ways. Does have potential though.

shyhh · Feb 27, 2003

Should Return to DD ratio be calculated based on yearly or monthly returns?

Is there a standard way of calculating it ?

links · Feb 27, 2003

I usually don't look any systems with a drawdown of more than 25%. Given human nature what it is, I think it may be easier to find Osama than to find traders who have stuck with their original system when their equity dipped more than 25%.

acrary · Feb 27, 2003

Quote from shyhh:

Should Return to DD ratio be calculated based on yearly or monthly returns?

Is there a standard way of calculating it ?

Annual Return in %/ Max. DD in %

Annual Return is:

(ending equity - starting equity)/starting equity

Max. DD is the largest:

(peak daily equity - lowest daily equity after peak equity)/peak daily equity

Ex. 100k account starting equity grows to 130k at end of year
peak equity to lowest equity = 120k to 90k

Max DD. = (120 - 90)/120 = .25 or 25%
Annual return = (130 - 100)/100 = .3 or 30%

Ratio = 30% / 25% or 1.2

daniel_m · Feb 28, 2003

Quote from vladiator:

Close but not exactly. There are plenty of spotty and sketchy pieces of evidence that show a pocket of inefficiency here or there. They don't constitute proofs though as long as there is no unifying theory that explains them all.

which is exactly the same situation emh is in. i guess trying to dislodge the status quo is alway harder than being it.

still, would you wanna bet that as each year goes emh is taken less and less seriously?
my guess is that in 10 years time we'll be laughing that we ever believed it.

DT-waw · Apr 30, 2003

Speaking of drawdowns. I think CTAs and hedge funds should present worst DD figure on a daily basis. It can be a huge difference, look at Dynex Corp Tetra High - http://www.dynexcorp.com/tetra10table.shtml Worst DD (monthly) is 35.8%, daily data 63.4%

spreadem · May 1, 2003

Speaking of drawdowns. I think CTAs and hedge funds should present worst DD figure on a daily basis. It can be a huge difference, look at Dynex Corp Tetra High - http://www.dynexcorp.com/tetra10table.shtml Worst DD (monthly) is 35.8%, daily data 63.4%

Not only CTAs and hedge funds ... but also these guys who promote these over optimized systems that they've dreamed up.

"324% return if you buy my system for $3000" ... yeah right!

Acceptable Max DD?

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