Paper Alfa - Macro & More

Paper Alfa - Macro & More

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A Simple Bond Allocation Model v2
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A Simple Bond Allocation Model v2

Another bond allocation model, back-tested

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Paper Alfa
Sep 28, 2023
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Paper Alfa - Macro & More
Paper Alfa - Macro & More
A Simple Bond Allocation Model v2
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As a follow-up piece to my previous bond allocation v1, I wanted to show you another example of a model-based strategy which has historically worked well. Again, I am taking a tested model which worked well into the mid-90s and then updating the weekly performances to see how it would have fared over the most recent times.

Source: Dall-e

From 1957 to 1995, this model's signals increased the average annual return of the chosen bond index from a 7.5% average annual return (not compounded) with a 21% maximum drawdown to an average annual return of 12.8% with a 3.4% maximum drawdown. This should be enticing enough to analyse whether this particular allocation rule-based strategy still offers value.

Let’s dig in!

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