Hi,
I would like to backtest different portfolio allocations overtime using the S&P 500 and an Aggregate Bond index. I would like to backtest different allocations to these asset classes over as long of a period as possible.
What is the best way to do this? I would think that dividends and interest payments would be important...especially for the bond allocation.
What are the best practices for testing these types of allocations?
Thank you
Backtesting Stock and Bond Allocations- Handling Div and Int
-
- Posts: 50
- Joined: 28 Sep 2014
- Has thanked: 7 times
- Henry MultiСharts
- Posts: 9165
- Joined: 25 Aug 2011
- Has thanked: 1264 times
- Been thanked: 2957 times
Re: Backtesting Stock and Bond Allocations- Handling Div and
Hello trader0311,
Please provide more details regarding your inquiry. What is the particular difficulty you have?
Please provide more details regarding your inquiry. What is the particular difficulty you have?
-
- Posts: 50
- Joined: 28 Sep 2014
- Has thanked: 7 times
Re: Backtesting Stock and Bond Allocations- Handling Div and
Hi Henry,
If I am modeling a stock and bond portfolio using ETF's over a very long period of time, the results are not representative of what the actual performance would have been because the tests are using the raw price data of both the stock and bonds ETF's. This is because, to the best of my knowledge, there is no way to account for the periodic dividend and interest payments that are made to the account holder of these securities.
In a perfect world, one could determine the interest or dividend payment made on a given day (if you are eligible to receive it) and build that payment into your performance. This is especially important for the bond etfs. The performance of a bond ETF vs a total return bond index is very different.
I am wondering if there are any mutual funds who don't distribute capital/dividends/interest to the holders...but rather reinvest them?
If I am modeling a stock and bond portfolio using ETF's over a very long period of time, the results are not representative of what the actual performance would have been because the tests are using the raw price data of both the stock and bonds ETF's. This is because, to the best of my knowledge, there is no way to account for the periodic dividend and interest payments that are made to the account holder of these securities.
In a perfect world, one could determine the interest or dividend payment made on a given day (if you are eligible to receive it) and build that payment into your performance. This is especially important for the bond etfs. The performance of a bond ETF vs a total return bond index is very different.
I am wondering if there are any mutual funds who don't distribute capital/dividends/interest to the holders...but rather reinvest them?
- Henry MultiСharts
- Posts: 9165
- Joined: 25 Aug 2011
- Has thanked: 1264 times
- Been thanked: 2957 times
Re: Backtesting Stock and Bond Allocations- Handling Div and
Hello trader0311,
Unfortunately we won't be able to help with that as this is not something that is related to MultiCharts or its functionality.
Unfortunately we won't be able to help with that as this is not something that is related to MultiCharts or its functionality.