Simulation (Stock) - Varying Equity Levels

Research
1

Hi
If I want to vary the total equity exposure (excluding cash) based on some condition how would I do that?

For example most time I would like the total equity to be 100% but under certain conditions I would like it to be less than 100%

Possible to model in Simulation?

Thanks

2

Not directly, but there are ways to accomplish this.

If using fixed position size, varying the # of positions can be used to control market exposure.

If using variable position size, a combination of max symbol weights and # of positions can be used to control market exposure.

In latter case, the max portfolio exposure should be the max(position_size) * #positions.

3

Hi Kartik,

I defer to David and others on much of this as I have not used variable position sizing since looking at the beta release. But this may be the way to go, I think, as the “Position Weight Formula” has the potential to use a large number of factors.

For simpler time series, has anyone used the Hedge Module recently? I may have to defer to others on this too as it has been a while since I used this. But, as I recall, it worked fine in my ports—when I did use it. One can “hedge” using short-term treasuries as the equivalent of cash.

This may not be useful as David’s ideas are likely to give you more control. But perhaps another simple option if it works for your needs.

-Jim

4

Thanks David and Jim

  1. using sizing method: portfolio size(5%) - I was able to use different Poscnt in buy rule…to control total equity
  2. using formula weight …I cannot find command to control position weight

Using hedge module…yes I can go in and out of a hedge ( which can be long cash) based on entry/exit conditions…however the amount of hedge has to be pre-selected

5

If you choose the formula weight method under the Rebalance tab, the options for minimum and maximum weight constraints help control the position allocations.

The nuances of formula weighting can be confusing. However, I have found that the step-by-step explanation of formula weighting in the documentation is accurate.