macrocephalopod on Twitter: "If we started with a stock with a *geometric* return of zero instead of *arithmetic* return zero the story would be different and you could make money (before costs) by rebalancing every day, although not at anything like the rate that you are imagining.… https://t.co/LXRohgnoSo"

@macrocephalopod

Paul Allen, Vice President M&A, Pierce & Pierce (Sie/Hir) | Vegan | Silence is Violence | Women’s Rights Are Human Rights | ACAB (Assigned Cephalopod At Birth)

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macrocephalopod‏ @macrocephalopod 13 Mar 2021

Replying to @goldstein_aa @breakingthemark @zzzrrrzzz12

Please, describe what the strategy here is, then go and simulate it. It will *at best* be flat.

1 reply 0 retweets 0 likes

Rip‏ @zzzrrrzzz12 13 Mar 2021

Replying to @macrocephalopod @goldstein_aa @breakingthemark

Please do. Of course, this is gross of tcost. Please keep that in mind. But you can make money.

1 reply 0 retweets 0 likes

macrocephalopod‏ @macrocephalopod 13 Mar 2021

Replying to @zzzrrrzzz12 @goldstein_aa @breakingthemark

Gross of tcost is fine. I’m still waiting for a description of the strategy though?

1 reply 0 retweets 0 likes

Rip‏ @zzzrrrzzz12 14 Mar 2021

Replying to @macrocephalopod @goldstein_aa @breakingthemark

Here's the strat. Let's say we have a portfolio of 50% cash / 50% your simulated stock. At the end of each day, rebalance this portfolio back to 50/50. Basically, you buy more stock if it goes down and sell some if it went up that day. Let me know the returns you see.

3 replies 0 retweets 0 likes

Rip‏ @zzzrrrzzz12 16 Mar 2021

Replying to @zzzrrrzzz12 @macrocephalopod and

So were you able to try this out? @macrocephalopod

1 reply 0 retweets 0 likes

macrocephalopod‏ @macrocephalopod 16 Mar 2021

Replying to @zzzrrrzzz12 @goldstein_aa @breakingthemark

I didn't bother responding because it so obviously doesn't work, but since you followed up - I implemented exactly what is described in this tweet (matab code in image) https://twitter.com/goldstein_aa/status/1370887341750038528?s=20 …pic.twitter.com/EMXiwPazXM

1 reply 0 retweets 1 like

macrocephalopod‏ @macrocephalopod 16 Mar 2021

Replying to @macrocephalopod @zzzrrrzzz12 and

I then implemented your strategy here (matlab code in the first image, resulting account equity in the second image)pic.twitter.com/ra0MLhWGLZ

4 replies 0 retweets 3 likes

Rip‏ @zzzrrrzzz12 16 Mar 2021

Replying to @macrocephalopod @goldstein_aa @breakingthemark

I really appreciate you taking the time to run this. This wasn’t the actual strategy though, you’re just holding a 50% weight in cash and 50% in a returns stream that has negative geo ret so year you’re gonna see a terrible return.

1 reply 0 retweets 0 likes

Rip‏ @zzzrrrzzz12 16 Mar 2021

Replying to @zzzrrrzzz12 @macrocephalopod and

I’m saying start with $100 dollars, 50 in cash and 50 in the asset. At the end of each day, observe your new allocation has shifted because of the days returns. Then, rebalance 50/50 of whatever NAV you have left into cash and the asset. This is different from your example.

1 reply 0 retweets 0 likes

macrocephalopod‏ @macrocephalopod 16 Mar 2021

Replying to @zzzrrrzzz12 @goldstein_aa @breakingthemark

That would be *exactly* the same as what I already did, except that the 'equity' variable would be multiplied by 100 to simulate starting with $100 instead of $1. It wouldn't change the overall result except that instead of ending with $0.000005 it would end with $0.0005

1 reply 0 retweets 0 likes

macrocephalopod‏ @macrocephalopod 16 Mar 2021

Replying to @macrocephalopod @zzzrrrzzz12 and

If we started with a stock with a *geometric* return of zero instead of *arithmetic* return zero the story would be different and you could make money (before costs) by rebalancing every day, although not at anything like the rate that you are imagining.

11:01 AM - 16 Mar 2021

1 reply 0 retweets 0 likes

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