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[blotter] Annotation of /pkg/quantstrat/demo/faberMC.R
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Annotation of /pkg/quantstrat/demo/faberMC.R

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1 : braverock 389 # This is a very simple trend following strategy for testing the results of:
2 :     # Faber, Mebane T., "A Quantitative Approach to Tactical Asset Allocation."
3 :     # Journal of Risk Management (Spring 2007).
4 :     # The article proposes a very simple quantitative market-timing model. They
5 :     # test the model in sample on the US stock market since 1900 before testing
6 :     # it out-of-sample in twenty other markets.
7 :    
8 :     # The article discusses a 200-day simple moving average, which is proposed
9 :     # in Jeremy Seigel's book "Stocks for the Long Run" for timing the DJIA. He
10 :     # concludes that a simple market timing strategy improves the absolute and
11 :     # risk adjusted returns over a buy-and-hold strategy. After all transaction
12 :     # costs are included, the timing strategy falls short on the absolute return,
13 :     # but still provides a better risk-adjusted return. Siegel also tests timing on
14 :     # the Nasdaq composite since 1972 and finds better absolute and risk adjusted
15 :     # returns.
16 :    
17 :     # The article implements a simpler version of the 200-day SMA, opting for a
18 :     # 10-month SMA. Monthly data is more easily available for long periods of time,
19 :     # and the lower granularity should translate to lower transaction costs.
20 :    
21 :     # The rules of the system are relatively simple:
22 :     # - Buy when monthly price > 10-month SMA
23 :     # - Sell and move to cash when monthly price < 10-month SMA
24 :    
25 :     # 1. All entry and exit prices are on the day of the signal at the close.
26 :     # 2. All data series are total return series including dividends, updated monthly.
27 :     # For the purposes of this demo, we only use price returns.
28 :     # 3. Cash returns are estimated with 90-day commercial paper. Margin rates for
29 :     # leveraged models are estimated with the broker call rate. Again, for the
30 :     # purposes of this demo, we ignore interest and leverage.
31 :     # 4. Taxes, commissions, and slippage are excluded.
32 :    
33 :     # This simple strategy is different from well-known trend-following systems in
34 :     # three respects. First, there's no shorting. Positions are converted to cash on
35 :     # a 'sell' signal, rather than taking a short position. Second, the entire position
36 :     # is put on at trade inception. No assumptions are made about increasing position
37 :     # size as the trend progresses. Third, there are no stops. If the trend reverts
38 :     # quickly, this system will wait for a sell signal before selling the position.
39 :    
40 :     # Data
41 :     # Instead of using total returns data, this demo uses monthly data for the SP500
42 :     # downloaded from Yahoo Finance. We'll use about 10 years of data, starting at
43 :     # the beginning of 1998.
44 :    
45 :     # Load required libraries
46 :     require(quantstrat)
47 :    
48 :     # Try to clean up in case the demo was run previously
49 :     try(rm("account.faber","portfolio.faber",pos=.blotter),silent=TRUE)
50 :     try(rm("ltaccount","ltportfolio","ClosePrice","CurrentDate","equity","stratFaber","initDate","initEq","Posn","UnitSize","verbose"),silent=TRUE)
51 :     try(rm("order_book.faber",pos=.strategy),silent=TRUE)
52 :    
53 :     # Set initial values
54 :     initDate='2007-01-01'
55 :     initEq=100000
56 :    
57 :     # Set up instruments with FinancialInstruments package
58 :     symbols = c("SPX", "^N225", "^GDAXI")
59 :    
60 :     currency("USD")
61 :     currency("JPY")
62 :     currency("EUR")
63 :    
64 :     #get the currencies
65 :     JPYUSD<-getPrice(to.monthly(getSymbols("JPY=X",auto.assign=FALSE),indexAt='lastof',drop.time=TRUE))
66 :     EURUSD<-getPrice(to.monthly(getSymbols("EURUSD=X",auto.assign=FALSE),indexAt='lastof',drop.time=TRUE))
67 :     colnames(JPYUSD)<-"JPYUSD"
68 :     colnames(EURUSD)<-"EURUSD"
69 :    
70 :     getSymbols(symbols,from=initDate)
71 :     #takes out the carat
72 :     symbols = c("SPX", "N225", "GDAXI")
73 :    
74 :    
75 :     stock(symbols[1], currency="USD",multiplier=1)
76 :     stock(symbols[2], currency="JPY",multiplier=1)
77 :     stock(symbols[3], currency="EUR",multiplier=1)
78 :     # to do this truly correctly, we'd use the futures contracts, which are tradable
79 :    
80 :     for(symbol in symbols) {
81 :     x<-get(symbol)
82 :     x<-to.monthly(x,indexAt='lastof',drop.time=TRUE)
83 :     indexFormat(x)<-'%Y-%m-%d'
84 :     colnames(x)<-gsub("x",symbol,colnames(x))
85 :     assign(symbol,x)
86 :     initPortf(symbol, symbols=symbol, initDate=initDate, currency=getInstrument(symbol)$currency)
87 :     initOrders(portfolio=symbol, initDate=initDate)
88 :     }
89 :    
90 :    
91 :     initAcct('faberMC', portfolios=symbols, initDate=initDate, currency="USD")
92 :    
93 :     # Initialize portfolio and account
94 :    
95 :     print("setup completed")
96 :    
97 :     # Initialize a strategy object
98 :     stratFaber <- strategy("faber")
99 :    
100 :     # Add an indicator
101 :     stratFaber <- add.indicator(strategy = stratFaber, name = "SMA", arguments = list(x = quote(Cl(mktdata)), n=10), label="SMA10")
102 :    
103 :     # There are two signals:
104 :     # The first is when monthly price crosses over the 10-month SMA
105 :     stratFaber <- add.signal(stratFaber,name="sigCrossover",arguments = list(columns=c("Close","SMA10"),relationship="gt"),label="Cl.gt.SMA")
106 :     # The second is when the monthly price crosses under the 10-month SMA
107 :     stratFaber <- add.signal(stratFaber,name="sigCrossover",arguments = list(columns=c("Close","SMA10"),relationship="lt"),label="Cl.lt.SMA")
108 :    
109 :     # There are two rules:
110 :     # The first is to buy when the price crosses above the SMA
111 :     stratFaber <- add.rule(stratFaber, name='ruleSignal', arguments = list(sigcol="Cl.gt.SMA", sigval=TRUE, orderqty=1000, ordertype='market', orderside='long', pricemethod='market'), type='enter', path.dep=TRUE)
112 :     # The second is to sell when the price crosses below the SMA
113 :     stratFaber <- add.rule(stratFaber, name='ruleSignal', arguments = list(sigcol="Cl.lt.SMA", sigval=TRUE, orderqty='all', ordertype='market', orderside='long', pricemethod='market'), type='exit', path.dep=TRUE)
114 :    
115 :     # Process the indicators and generate trades
116 :     start_t<-Sys.time()
117 :     out<-try(applyStrategy(strategy=stratFaber , portfolios=symbols))
118 :     end_t<-Sys.time()
119 :     print("Strategy Loop:")
120 :     print(end_t-start_t)
121 :    
122 :     # look at the order book
123 :     #print(getOrderBook('faber'))
124 :    
125 :     start_t<-Sys.time()
126 :     for(symbol in symbols) {
127 :     updatePortf(Portfolio=symbol,Dates=paste('::',as.Date(Sys.time()),sep=''))
128 :     }
129 :     end_t<-Sys.time()
130 :     print("trade blotter portfolio update:")
131 :     print(end_t-start_t)
132 :    
133 :     #and a combined portfolio
134 :     initPortf('combMC', symbols=symbols, initDate=initDate, currency="USD")
135 :     initOrders(portfolio= 'combMC', initDate=initDate)
136 :     comb.out<-applyStrategy(strategy=stratFaber , portfolios='combMC')
137 :     updatePortf(Portfolio='combMC',Dates=paste('::',as.Date(Sys.time()),sep=''))
138 :    
139 :     # hack for new quantmod graphics, remove later
140 :     themelist<-chart_theme()
141 :     themelist$up.col<-'lightgreen'
142 :     themelist$down.col<-'pink'
143 :     for(symbol in symbols){
144 :     dev.new()
145 :     chart.Posn(Portfolio=symbol,Symbol=symbol,theme=themelist)
146 :     plot(add_SMA(n=10,col='darkgreen', on=1))
147 :     }
148 :    
149 :    
150 :     ###############################################################################
151 :     # R (http://r-project.org/) Quantitative Strategy Model Framework
152 :     #
153 :     # Copyright (c) 2009-2010
154 :     # Peter Carl, Dirk Eddelbuettel, Brian G. Peterson, Jeffrey Ryan, and Joshua Ulrich
155 :     #
156 :     # This library is distributed under the terms of the GNU Public License (GPL)
157 :     # for full details see the file COPYING
158 :     #
159 :     # $Id: faber.R 371 2010-08-12 20:18:09Z braverock $
160 :     #
161 :     ###############################################################################

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