CompInvesti Homework 4

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Overview

In this homework you will take the output of your Event Study work to build a more complete back testing platform. Specifically, you should choose an event from the ones you have experimented with in this class, assess it and tune it using the Event Profiler, then back test it with the simulator you created.

To Do

Part 1: Revise your event analyzer to output a series of trades based on events; Instead of putting a 1 in the event matrix, output to a file

Date, AAPL, BUY, 100
Date + 5 days, AAPL, SELL, 100

Part 2: Feed that output into your market simulator.

Part 3: Report the performance of your strategy in terms of total return, average daily return, STDDEV of daily return, and Sharpe Ratio for the time period.

Experiments to Run

You should run two experiments.

  • Experiment 1: Use the actual close $5.00 event with the 2012 SP500 data. I expect that this strategy should make money. We will use this example to make sure everybody is getting "correct" answers. You can share your numerical results with others to make sure you're on the right track. Use the following parameters:
    • Starting cash: $50,000
    • Start date: 1 January 2008
    • End date: 31 December 2009
    • When an event occurs, buy 100 shares of the equity on that day.
    • Sell automatically 5 trading days later.
  • Experiment 2: Devise your own event and trading strategy.

For both experiments, you should:

  • Create a chart to illustrate the performance of your fund.
  • Compute the Sharpe Ratio, total return and STDDEV of daily returns.

Other Details

  • You have already prepared the event study and the market simulator in the previous two homeworks. And now we shall combine the two pieces together.
  • It is important to note that 5 days is actually 5 trading days.
  • For the final few events assume that you exit on the last day, so hold it less than 5 days.

Example Output

On simulating the $5 event the output is:

The final value of the portfolio using the sample file is -- 2009,12,28,54824.0

Details of the Performance of the portfolio

Data Range :  2008-01-03 16:00:00  to  2009-12-28 16:00:00

Sharpe Ratio of Fund : 0.527865227084
Sharpe Ratio of $SPX : -0.184202673931

Total Return of Fund :  1.09648
Total Return of $SPX : 0.779305674563

Standard Deviation of Fund :  0.0060854156452
Standard Deviation of $SPX : 0.022004631521

Average Daily Return of Fund :  0.000202354576186
Average Daily Return of $SPX : -0.000255334653467

Minor differences in float values may arise due to different implementations.

Assessment

It will be similar to the last two Homeworks. Once you have everything working. You'll be asked to attempt the quiz with slight modifications. And just plug in your answer.

Deliverables for on campus GT students

To turn in:

  • The code for your two events: 5dollar.py, myevent.py
  • A report, report.pdf that includes:
    • The 2 charts, one for 5dollar, they other for the event you developed.
    • The numerical results for each event: Sharpe Ratio, total return and STDDEV of daily returns
    • A description of the event you developed.