Howard,
Comprehensive and well thought out, well written reports
like yours are
always appreciated.
--
Terry
-----Original
Message-----
From: [EMAIL PROTECTED]ps.com
[mailto:[EMAIL PROTECTED]ps.com]
On
Behalf Of Howard Bandy
Sent: Sunday, September 03, 2006 11:29
To:
[EMAIL PROTECTED]ps.com
Subject:
[amibroker] Moon Phase as a profitable predictor
Thanks to everyone who
has contributed code to compute the phase of
the moon, and to the
discussion of whether the phase of the moon is
profitably predictive for
common stock investing. I have done some
testing and find that the phase of
the moon is Not a profitable
predictor.
I used the code posted by
OzFalcon (thanks), removed the extraneous
information, such as distance to
the moon, and added code to compute
two values: the percentage close to
close change for the day ahead
and the percentage of the phase of the moon
relative to it being a new
moon. My in-sample test was performed on daily
data using a period
from 1/1/1995 to 1/1/2005 -- ten years. Three indices
were studied --
the Russell 3000, the S&P 500, and the S&P 600
small cap. The
individual backtest results from these AmiBroker runs were
exported,
opened in Excel, and analyzed. It was relatively easy to
identify
periods where the price change for the day ahead consistently rose
for
some values of the phase of the moon, and fell for some other
values.
The analysis was carried out using several different levels
of
granularity for the phase of the moon -- from one percent "bins"
to
twenty-five percent bins -- and several different levels
of
profitability -- from cherry picking the highest long and
highest
short returns to "always in". Code was added to the afl
procedure
that bought and sold accordingly, initially holding exactly one
day.
No deduction was made for commission or slippage.
To test the
in-sample performance, I ran individual backtests against
the 500 stocks in
the S&P 500 and the 100 stocks in the Nasdaq 100.
No surprise -- the
results were spectacular. For example, using
granularity that picked the
best twenty percent (about fifteen percent
long and six percent short), so
the model is invested twenty percent
of the time and flat eighty percent of
the time, the median RAR
statistic for the S&P 500 stocks was about
80%, and the median RAR
statistic for the Nasdaq 100 stocks was about
160%.
To test the validity of the model, I chose an out-of-sample
period
from 1/1/2005 through 9/1/2006 -- twenty-one months -- and reran
the
individual backtests. As expected, the system is invested
about
twenty percent of the time. The median RAR statistic for the S&P
500
stocks was about -7% (minus seven percent), and the median
RAR
statistic for the Nasdaq 100 stocks was about 0% (zero).
I
tried several other combinations of granularity of phase
(various
percentages, daily, always in, etc), strength of signal
(strongest
only, average of the in-sample tests, etc), length of holding
period
(one day, several day, stop and reverse, etc). The results
were
almost always profitable for the in-sample period and Never
profitable
for the out-of-sample period, even with zero deduction for
slippage
and commission.
I may have missed something here, but I do
not think so. I would be
happy to hear from forum members who have had
success (either
profitable trading or profitable performance in
out-of-sample tests)
using moon phase in their trading, and I will be happy
to test and
report other reasonable suggestions for using moon phase as a
trading
indicator.
Thanks for listening,
Howard
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