Yuval, thanks for a look behind the curtain, very insightful. Definitely giving me some ideas…
I think I will try this multi-version book approach next week to start.
Compustat as another diversifier sounds very, very intriguing. I’m aware of the additional cost involved. It would be nice if you were able to trial older Computstat history (say up until the last 4-5 years) to see if had utility before incurring a huge upfront charge. If that’s not possible, do you have a sense of the correlation between any of your strategies when run on FactSet vs Compustat? And does a Compustat subscription cover all the Canadian and European markets too?
Interesting that you are doing so much portfolio management in Excel. Personally, I have been using p123’s book functionality for the last several months for some 100/30 long/short trading and it’s been really useful. I honestly think books are a hidden gem feature that many users may be underutilizing, though at the same time, it’s missing some features that may cause me to export my ranks/orders and do portfolio construction outside of p123:
- Leverage at the book level
- Optimizer support for book parameters (asset weights, rebalance thresholds, and leverage)
- Dynamic asset weights
- Basic portfolio optimization (mean-variance optimization), etc.
- Searching for designer models by lowest correlation or lowest absolute correlation to one or more assets in the book
I feel a combination of 1 and 2 alone could yield a 10 percentage point improvement in CAGR alone. I’m applying leverage at the strategy level right now, but it’s very cumbersome and not always viable e.g. if incorporating a designer model, or good luck creating a 2x leveraged short strategy that doesn’t wipeout if you want to create a market neutral book.
I’m also looking to incorporate 1 or 2 designer models this year. You can see their correlation once you’ve added them to the book – and it’s great that you have access to this history even for unsubscribed model, but it might drive more designer model subscriptions if it were easier to search for designer models that are most uncorrelated to your own.
Thanks.