The behavior you’re seeing is due to the removal of the ‘Min/Max Scaling’ option in an effort to declutter the interface. We opted to see whether forcing that adjustment to always take effect when deviating from the ideal number of positions would be an acceptable option, realizing 1) that it may appear that the system is ignoring your configuration and 2) that the desirability of the adjustment is largely dependent on the strategy and intent of the model. Combining a strict max weight constraint with too few positions very easily prevents a model from being fully invested. In your case with an ideal number of positions of 25 and a max weight of 4% (equal weight), the system is tracking equal weight with the actual number of positions when applying the max weight constraint.
The options to address this idiosyncratic behavior are:
[list=1][]Add Min/Max Scaling back (preferably with clearer naming/options)[]Eliminate this adjustment altogether[*]Enable this adjustment exclusively when ‘Transaction Control’ is set to ‘Avoid’, since it already carries a the meaning that the model prefers to be ‘100%’ invested
Hi guys.
Sorry, I have not been following the whole thread neither tried much. But just a wish and input from my side. It would be great if there was an option that would remove the 100% allocation restriction. For example, I wished I could simulated leveraged models (like 150% long + 100% hedge) or risk parity ETF models. It would be great if a variable long exposure could be set by either setting the total max. portfolio long exposure directly (e.g. 150% exposure total long positions), or indirectly 15 positions x 10% max position weight. And may-be also a total min. portfolio exposure to what the positions scale to.
I think a min/max scaling option is more useful and easier to grasp than the min/max weight constraint. What I would like is the possibility to never have more than 10% of my portfolio in any one stock (or, if I have a larger portfolio, a smaller percent), and also the possibility to eliminate buys that would amount to less than 1% of my portfolio. I can’t see how to do this without some kind of min/max option, and the min/max weight constraint doesn’t seem to work that way. The original interface allowed us to do this.
For the sake of time, I’m going to deploy a version which behaves according to the third option I suggested.
That works very well. Thank you! - YT
The beta has been expanded to include support for formula weight in live portfolios. The rebalance interface has been improved to better support this new workflow. The beta will be coming to a close after the design changes to the Transaction/Exposure Control option are finalized and implemented.
[color=orange]WARNING: To protect your user data, be sure to make a copy before trying it out on one of your existing portfolios, as the beta site is running on the production database.[/color]
My simulations don’t work anymore. They all say “Portfolio sizing method ‘Formula Weight’ is not supported.”
Hi juvaltaylor
Sorry - I switched the beta to the wrong version of the site this morning. Should be back now.
ted
P123 Team
When will the BETA ‘Formula Weight’ Position Sizing Method become the standard?
This method is so much better than the current rebalancing module.
Thanks for doing this.
We’re planning to make it available on the production servers some time this week.
This is really good news. Will DMs also accept this new method?
Yes. We plan to remove the restriction a few weeks after it’s out in the wild.
Aaron,
In the Realized Transaction listing what is the meaning of the letters at the end of the note: D and C or no letter as in the following examples:
Rebalance 32.89% D
Rebalance 34.05% C
Rebalance 33.34%
Will it be available for use in the Screener?
The letters in transaction notes:
[]A/B mean the raw weight from the formula was increased/decreased when normalizing weights. This can happen when weight constraints are stricter than the formula distribution.[]C/D mean the transaction amount was increased/decreased. This is very likely to happen when ‘Exposure after Rebalance’ is set to ‘Automatically adjust’.[]E means hedge entry on a cash portfolios forced an unscheduled rebalance. The rebalance date is not advanced to keep reconstitution & rebalance synchronized to the original schedule. (This aspect is prone to future enhancement.)[]F means an exceptional condition happened. This should never happen.
There is no plan to allow screen backtests to allow anything besides equal weight at each rebalance.
getting this error…
No server available for request. Please try again later.
Question:
I have live ports which do NOT use Formula Weight. They use % Portfolio Weight.
I built these ports using SecWeight buy rules.
I assume I don’t need to change those rules to SecCount as long as I use % Portfolio Weight. That SecWeight is still a valid buy rule if you are using the traditional P123 weighting.
Many thanks.
That is correct, Parker. There was a slight modification to the Weight factors so they make more sense after executing transactions (as detailed in this post), but it should generally work the same way as before with % Portfolio Weight.
Thank you!
This feature is really confusing and I’m not using it correctly
I would like to limit a portfolio to 15 roughly equal holdings (i.e 6.67% each). What settings do I put in to minimize the simulation from running up transaction costs to sell just a handful of shares.
As an example I’d be ok with a 6-7% holding which is essentially what I’d do in person. How do I change the settings to imitate this?