Some Days Really are Worse than Others; Part II

  • SumoMe

In response to some questions on the “Avoid Bad Days System” –we’ll call it the ABD System for short (Note to myself: come up with a better name) I wrote about here, this article includes some more details, fact, figures, etc.

*In a nutshell, the ABD System outperforms by being out of the market during a lot of bad days.  It also does it by outperforming the overall market when the overall market has a bad year.  To wit:

*During the 21 calendar years since 1946 when the Dow has showed a loss for the year, the ABD System outperformed the Dow 20 times and underperformed only once.

Concistency is another key:

*ABD System showed a gain during all 68 rolling 5-year periods and outperformed the Dow during 48 of 68 rolling 5-year periods.

*ABD System showed a gain during all 63 rolling 10-year periods and outperformed the Dow during 54 of 63 rolling 5-year periods.

1-Year Returns

  System Buy/Hold BadDays System-Buy/Hold
Average 10.4% 7.9% (2.1%) +2.5%
Median 10.2% 9.7% (1.6%) +2.1%
Std Dev 11.9% 15.5% 8.5% 9.0%
Ave/Std Dev 0.87 0.51 (0.24) 0.27
Max% 36.4% 44.0% 15.3% 20.1%
Min% (16.4%) (33.8%) (23.0%) (16.2%)
# Up 59 51 33 40
# Down 13 21 39 32

Figure 1

5-Year Rolling Returns

System Buy/Hold BadDays System-Buy/Hold
Average 64.7% 46.7% (10.2%) +18.0%
Median 60.0% 47.8% (13.3%) +21.3%
Std Dev 36.2% 45.9% 16.4% 26.6%
Ave/Std Dev 1.79 1.02 (0.62) 0.68
Max % 149.7% 199.8% 37.4% 72.0%
Min % 2.6% (23.0%) (31.6%) (56.6%)
# Up 68 55 22 48
# Down 0 13 46 20

Figure 2 – Using 5-Year Look back at the end of each year

10-Year Rolling Returns

System Buy/Hold BadDays System-Buy/Hold
Average 176.4% 114.5% (21.1%) +61.9%
Median 156.3% 96.6% (21.6%) +67.3%
Std Dev 98.9% 95.6% 18.9% 46.5%
Ave/StdDev 1.78 1.20 (1.12) 1.33
Max % 408.2% 323.4% 19.2% 141.9%
Min % 26.1% (29.5%) (51.2%) (44.6%)
# Up 63 56 9 54
# Down 0 7 54 9

Figure 3 – Using 10-Year Look back at the end of each year

Year-by-Year Results 

Year System Buy/Hold BadDays System-

Buy/Hold

1946 10.1 (8.1) (16.2) 18.2
1947 (3.7) 2.2 6.6 (6.0)
1948 (3.0) (2.1) 1.3 (0.9)
1949 11.2 12.9 1.9 (1.7)
1950 7.9 17.6 9.4 (9.7)
1951 30.4 14.4 (12.0) 16.1
1952 4.5 8.4 4.1 (3.9)
1953 (1.2) (3.8) (2.3) 2.5
1954 33.4 44.0 8.2 (10.5)
1955 11.8 20.8 8.3 (8.9)
1956 13.9 2.3 (9.9) 11.6
1957 (5.1) (12.8) (7.8) 7.7
1958 32.9 34.0 1.1 (1.1)
1959 8.6 16.4 7.5 (7.8)
1960 7.0 (9.3) (15.0) 16.3
1961 23.2 18.7 (3.3) 4.4
1962 6.9 (10.8) (16.3) 17.7
1963 17.8 17.0 (0.4) 0.8
1964 12.7 14.6 1.9 (1.8)
1965 16.7 10.9 (4.7) 5.8
1966 (9.1) (18.9) (10.5) 9.8
1967 15.2 15.2 0.3 0.0
1968 15.1 4.3 (9.1) 10.8
1969 (7.3) (15.2) (8.2) 7.9
1970 13.4 4.8 (7.3) 8.6
1971 18.2 6.1 (10.0) 12.1
1972 11.8 14.6 2.8 (2.8)
1973 (8.9) (16.6) (8.1) 7.7
1974 (16.4) (27.6) (13.1) 11.2
1975 36.4 38.3 1.7 (1.9)
1976 5.1 17.9 12.5 (12.8)
1977 (6.1) (17.3) (11.7) 11.2
1978 7.0 (3.1) (9.2) 10.2
1979 0.5 4.2 4.0 (3.7)
1980 9.6 14.9 5.2 (5.4)
1981 (1.9) (9.2) (7.2) 7.3
1982 6.3 19.6 12.9 (13.3)
1983 10.3 20.3 9.3 (9.9)
1984 3.1 (3.7) (6.3) 6.8
1985 19.4 27.7 7.2 (8.2)
1986 10.9 22.6 10.9 (11.7)
1987 22.3 2.3 (16.2) 20.1
1988 13.1 11.8 (0.8) 1.2
1989 19.2 27.0 6.9 (7.8)
1990 13.1 (4.3) (15.2) 17.4
1991 28.2 20.3 (5.9) 7.9
1992 7.7 4.2 (3.0) 3.6
1993 13.5 13.7 0.5 (0.2)
1994 11.4 2.1 (8.0) 9.2
1995 29.7 33.5 3.2 (3.7)
1996 9.8 26.0 15.1 (16.2)
1997 34.0 22.6 (8.2) 11.4
1998 5.8 16.1 10.1 (10.3)
1999 23.6 25.2 1.6 (1.6)
2000 0.9 (6.2) (6.7) 7.1
2001 3.1 (7.1) (9.6) 10.2
2002 (7.7) (16.8) (9.5) 9.0
2003 36.1 25.3 (7.7) 10.8
2004 6.5 3.1 (2.8) 3.3
2005 2.8 (0.6) (3.0) 3.4
2006 13.3 16.3 3.0 (3.0)
2007 3.2 6.4 3.4 (3.2)
2008 (13.8) (33.8) (23.0) 20.1
2009 18.1 18.8 0.9 (0.8)
2010 17.3 11.0 (5.0) 6.2
2011 7.3 5.5 (1.3) 1.8
2012 9.7 7.3 (1.9) 2.4
2013 23.9 26.5 2.4 (2.6)
2014 (6.4) 7.5 15.3 (14.0)
2015 9.6 (2.2) (10.6) 11.9
2016 11.2 13.4 2.3 (2.2)
2017* 13.1 18.3 4.8 (5.1)

Figure 4 – Annual % +/(-) for ABD System versus Buy-and-Hold

*thru 10/31/2017

Jay Kaeppel

Disclaimer:  The data presented herein were obtained from various third-party sources.  While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.

 

 

 

2 thoughts on “Some Days Really are Worse than Others; Part II

  1. Thanks for the update! May be great to combine this strategy with a timing mechanism. For instance only buying on those days when the Dow is above its 200 day SMA.

    1. True. Or something that whipsaws less than the 200-day MA, like the S&P > than it was 12 months ago (based on end of month data). Most of the worst years for the system were in bear markets (73-74, 2002, 2008). On the other hand, you also miss part of strong recoveries that follow bear markets (1975, 2003, etc.) I think your drawdowns and other risk metrics would look better with a trend filter, though.

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