Portfolio backtesting tools

  • Thread starter David S. Meyers CFP
  • Start date

D

David S. Meyers CFP

Hi folks. Just curious what, if anything, folks are using
to analyze historical performance of portfolios.

I've played a little bit with ETFReplay.com today. It's
actually kind of nice for a quick look, but I don't know
that the full access is worth $30/mo.

Their free tool isn't bad: http://etfreplay.com/combine.aspx
(Handy trick - you can use any symbol as your benchmark -
including VBINX if you want a 60/40 index) I spent a little
time with it today with a few 2,3, and 5 fund portfolios.

Fidelity's got some tools for backtesting active strategies,
but I didn't see a simple asset-allocation/periodic-rebalance
version, nor did the multi-symbol backtest allow anything other
than a few equity indices as the sets of symbols. (ie. the
Dow 30 stocks).

FolioFN will let you do backtesting, but you have to have
an account. Their system would probably work pretty well
for a lot of people, actually, and I've been thinking
about opening an account just to try them out anyway. (As
if I need any more accounts anywhere right now.)

But I'm really looking for something to do target-allocation
with periodic rebalances (with or even without bands for
trade triggers - since this is theoretical anyway, I don't
mind if it's a hard rebalance to fixed percentages), and
to include mutual funds, ETFs and equities, to run the
allocations over various historical time periods, show
returns, volatilities, etc.

I've done a lot of this by hand on spreadsheets in the past
and maintain a pretty decent sized database of historical
prices for a batch of symbols (thanks, Yahoo), but I just
can't justify the time it would take to roll my own tools.

I've noted a couple of other tools, none of them cheap -
such as Kwanti and MultiCharts.

And I'm certainly hoping to avoid the expense of something
like MStar Principia, though that appears to be the standard
(ie. I see financial journalists refer to screens and other
research they've done through it all the time).

Anyway, I'd love to hear what folks use, if they use anything
at all.
 
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E

Elle

But I'm really looking for something to do target-allocation
with periodic rebalances (with or even without bands for
trade triggers - since this is theoretical anyway, I don't
mind if it's a hard rebalance to fixed percentages), and
to include mutual funds, ETFs and equities, to run the
allocations over various historical time periods, show
returns, volatilities, etc.
A few ideas, maybe not fitting your bill above exactly but perhaps
helpful to some readers:

joetaxpayer.com linked http://www.assetplay.net/financial-tools/backtest.html
recently. It goes back to 1972, which may not satisfy all readers.

The seminal discussion of "target allocation" to me is the Trinity
Study. For example see http://www.retirement-income.net/trintable3.htm

Were you hoping for a tool that would look at individual stock
positions? For example, how the stock GE did over the last 100 years?
I have often hoped for such a tool but realize that the larger
companies have so many spinoffs and mergers that it can get
complicated. I rely on what Jeremy Siegel says on this, in general
terms but with some specific companies cited, in _The Future for
Investors_ (2005).
 
D

David S. Meyers CFP

Elle said:
A few ideas, maybe not fitting your bill above exactly but perhaps
helpful to some readers:
Thanks for posting these, Elle.
joetaxpayer.com linked http://www.assetplay.net/financial-tools/backtest.html
recently. It goes back to 1972, which may not satisfy all readers.
It's actually a pretty nice tool with a good, broad array of asset-class
choices to play with.
The seminal discussion of "target allocation" to me is the Trinity
Study. For example see http://www.retirement-income.net/trintable3.htm
There was an update by the original Trinity authors, published in
the April Journal of Financial Planning which extended the original
study out through 2009. Conclusions were quite similar, and it's
worth the read. There seems to be an article roughly every other month
in the JFP (published by the FPA) about these issues.
Were you hoping for a tool that would look at individual stock
positions? For example, how the stock GE did over the last 100 years?
Actually, most of the asset classes I want to work with have decent
ETFs, though the period of coverage is sometimes quite short. Some of
the studies extend backwards using indices or switching when you get to
before a given asset class was available easily. And there are a few
things I want to play with which just aren't represented well in any
funds or ETFs. I've been building out a historical database of prices
and distributions for a wide variety of things (big thanks to the
ease with which I am able to script downloads from Yahoo), but before
I spend a huge amount of time writing code, I was hoping to find
something out there that's already done the work. It's obviously
out there, but apparently the main way to access this stuff is through
quite pricey services like Morningstar's professional platforms.

I think I'm going to have to write the code anyway, as there are
some analyses that would be less likely to be able to be done
unless, for example, I could get the third-party tool to implement
rebalancing/distribution management in very specific custom ways.

Thankfully, the Yahoo data is free. I haven't asked, but I'm
sure even subscriptions to "serious" databases (ie. UChicago
has a service) are out of my price range. (The Federal
Reserve also makes some great time-series data available
for free, too).
I have often hoped for such a tool but realize that the larger
companies have so many spinoffs and mergers that it can get
complicated.
Very true and, thankfully, most of those companies are easy
enough to ignore specifically, inasmuch as they are covered
pretty well in either indices or ETFs.
I rely on what Jeremy Siegel says on this, in general
terms but with some specific companies cited, in _The Future for
Investors_ (2005).
I'll take a look at that next time I get a chance.

Thanks again.
 
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Hi David,

just wanted to let you know that your conclusion in regards to the Fidelity product is wrong. The thing you are looking for can be done in Waealth-Lab, it just needs time and skill. You can create your own symbols list that can be anything from one to a few thousand symbols.
Ofcourse you can do Asset-allocation or rebalancing, anything is possible, the limitation is you. The other tools mentioned here look to me like "asset optimization" tools that look good now. It would be too early for me to comment on them. However it is often that people who like to manage other people money do not go the hard way but the easy way.
Hard way is:

1. Getting good data (adjusted, note adjusted, etc.)
2. Testing for survivorship bias
3. Define Rules
4. Testing out of sample (may be even foreign markets)
5. Trade it with your own money. ;)

There is much more but I did not reply to give a lesson but to tell you that your conclusion on Wealth-Lab (PRo or Developer) is not correct and that you obviously did not put in the minimum time to investigate.

Volker
Wealth-Lab


Hi folks. Just curious what, if anything, folks are using
to analyze historical performance of portfolios.

Fidelity's got some tools for backtesting active strategies,
but I didn't see a simple asset-allocation/periodic-rebalance
version, nor did the multi-symbol backtest allow anything other
than a few equity indices as the sets of symbols. (ie. the
Dow 30 stocks).

I've done a lot of this by hand on spreadsheets in the past
and maintain a pretty decent sized database of historical
prices for a batch of symbols (thanks, Yahoo), but I just
can't justify the time it would take to roll my own tools.

Anyway, I'd love to hear what folks use, if they use anything
at all.


--
David S. Meyers, CFP(R)
 

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