[Frank]

Hi,
I’ve implemented the GMR Strategy based on the information in your related Seeking Alpha article and its comments. It comes quite close to the monthly ETF selections of Logical Invest’s version of the strategy, many months with exact matching, other months with just small differences in the ranking scores that lead to a different selection.

But I have also found a few months with major differences in the scores where Logical Invest’s selection had a huge positive impact on the performance while the published version of the strategy kept investing in an ETF that suffered a major loss during the following month. In the ranking with the published strategy I get score differences of about 50% between the two ETFs, in a 0 to 100% range of the scores. So the ETF selected by Logical Invest was far from being at the top position. It was not a just slight difference in the scores that led to the selection of the other ETF.

Based on the momentum and volatility based ranking logic, even with dynamic calculation of the best look-back period and other parameters I don’t see a chance to get to the ETF selection as it was made in those situations. The most important case in the history of the strategy is the switch from EDV to MDY at the end of September 2011. That was brilliant bottom picking!!! I’d like to be able to make that decision in that moment! However, the momentum didn’t indicate by 30th Sep 2011 that there would be a bottom in MDY on 4th October and a powerful market turn which initiated an uptrend that lasts until today.

Does your proprietary strategy consider other things than momentum and volatility such as extreme market situations that scream for mean reversion? I observed that in most cases where my ranking of the ETF you selected gave it a score that was far from the top position, it was that the published strategy kept investing in a spiking EDV while the Logical Invest strategy switched to equities which were about to win in the comming market turn.

[Author]

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