Based on a foundation by InvestExel, Denis Bergemann from Germany collaborated with me in developing an Excel spreadsheet that allows you to select your preferred risk-on and risk-off assets, set backtest parameters to your liking and review results by their statistics as well as in graphical format.
The work flow goes like this:
- Run the backtest after Yahoo has published the closing data for the month
- Enter the risk-on and risk-off assets in the two dedicated columns of the sheet
- Set start and end dates
(NB! Observe a 1-year initialization period for the ETF with the shortest history)
- Keep frequency at m (=monthly quotes)
- Adjust protection level* (default = 2: high protection)
- Select number of top assets
- Click the button [Download Data] and wait until downloading has finished (graphs and tables will disappear)
- Finally click the button [Calculate Systems] and wait for the VBA magic to finalize (graphs and tables are reprocessed).
The sheet allows for adjusting the protection level or the top selection without a new download, but changing the backtest range or altering the asset lists requires to start with a fresh data download.
Please note the number of risk-on or risk-off assets is not restricted to 12 and 2, just select the ETFs and/or mutual funds you prefer.
The sheet also shows the allocation percentages for the upcoming month after Yahoo has published the monthly closing data, usually available a couple of hours after the NYSE market session has ended on the last trading day of the month.
- The sheet only works with Windows.
- The protection level is simplified to ( p * ∑ [ri <= 0] ) / N, so p = 0 turns the protection logic off. With p = 2, the protection level equals high protection as used in the presentation of PAA and GPM.
The Excel sheet for PAA / GPM is available upon request. Interested parties are encouraged to support this blog with a donation.