Bogleheads

[gummy]

Mamma mia!
Simba, you is so fast!
I wuz still workin' on rev5j when you done finished rev5k with the probability stuff included.

About Ito, the lognormal distribution of prices at time T (starting with price Po) is:

I just stuck in the parameters r, s and Po, using your data.

[jms969]

[jms969]

[gummy]

jms969:
Thanks for the link to all them thar spreadsheets.
I reckon I gotta steal some things to add to this collection:**
http://www.gummy-stuff.org/stock-charts.htm

** Thievery is my favourite hobby ...

[jms969]

[edge]

I think the past few exchanges illustrate the need for a collaborative tool to help streamline updates and availability - google spreadsheets could work here. If any more assistance is required to understand how to set this up I could volunteer to help.

In any case, the changes are pretty cool.

[jms969]

[gummy]

[norm]

[edge]

[SoonerSunDevil]

Gummy/Simba,

Could either of you explain what the graph showing the "Probability of achieving less than 1000$P in 15 years" means?

I'm sorry that my mathematical abilities are limited; I only had Calculus I and II during college

Thanks,

John

[simba]

Thanks to Gummy - I updated the spreadsheet to calculate Sortino ratio.

The formula I used is

=((AVERAGE(AB5:AB39))-(AVERAGE(Data_72_06!$V$5:$V$39)))/STDEV(IF(AB5:AB39<AVERAGE(Data_72_06!$V$5:$V$39),AB5:AB39))

Need to enter that formula with Ctrl-Shift-enter.

Latest version rev5m can be downloaded here

[sterjs]

I posted a link to the sheet on another messageboard and one poster thinks that the sheet's calculation of Sharpe Ratios is off:

"yea the sharpe ratio calculations don't take compounding into effect

they use Average(portfolio returns)-Average(tbill returns) to get the excess returns. it should be subtracting the tbill return from the portfolio return in each time period and then calculating the compound returns.

their sharpe ratios are historical underestimates in this case (sheets SP-72-06 and SP-85-06). "

[norm]

Simba,

After I entered the % of my allocations nothing appeared on the graphs. Am I missing a step? My total allocation comes to 100%
_________________
NormC

�Illegitimus Non Carborundum �

“The art is not in making money, but in keeping it”

[gummy]

[Eric White]

Simba:

ERROR FOR 85-06 CALCULATIONS:

Cell Z3 on sheet Returns_85_06 uses the following formula:
=Portfolio!$K$28

Cell AA3 on sheet Returns_85_06 uses the following formula:
=Portfolio!$K$30

It looks like Cell AA3 needs to use the formula =Portfolio!$K$29, and the remaining cells in the row need new transposed links.

ERROR CHECKING REQUEST
Also, if you can eliminate this error check in the calculations and instead use simple 100% summary visual sanity checks, that reduces rework for each rev to enable efficient frontier Excel Solver calculations. I have redone the Solver work twice now and it's been obsoleted a third time. I will not be supporting efficient frontier additions moving forward if we can't find a solution that will be incorporated or planned with compatibility in mind.

CHANGE PLANNING
Although I'm Pi Tau Sigma and Tau Beta Pi and enjoy mathematical acrobatics, simplicity is our friend until the basic portfolio options and datasets get nailed down. It will let us focus on data quality and basic calculation integrity. I think after the portfolio request additions and resulting structures settle down we should initiate discussions (and polls!) around metrics that are most useful to Diehards overall. I'm a little worried that as we add metrics into the tool, we may start to lose the forest for the trees.

Of course, I'm a guilty party in this process as well, shooting for the efficient frontier calcs too early Portfolio Process Capability (Cp), Kurtosis, Monte Carlo analysis, discrete event simulations, and system dynamics models should all have their day in the sun, just maybe not yet (insert your "horse before the cart" jokes here).

Thanks for all the hard work Simba! This is the foundation for expansion work down the road.

Cheers,
Eric

[Eric White]

Do fellow Diehards feel it would be useful to add costs for each investment choice (absolute return - cost - inflation = real investor return) and include them in calculations? Sorry if it's already in there...

In addition, does anyone have datasets we can add for the following asset subclasses:

High Priority:
- Stable value/fixed (e.g. GICs, etc. offered via insurance to 401ks/403bs)
- Currencies? (to separate currency effect from International, European, Pacific, and EM returns; similar to inflation for separating investor returns)

Medium Prioriy:
- Int SV (no current Vanguard availability; ETF availability)
- EM SV (no current Vanguard availability; future ETF availability)
- Int REIT (no current Vanguard availability; mutual fund & ETF availability; new asset subclass may not have sufficient data)

Low Prioriy:
- Private Equity (no current Vanguard availability; future ETF availability?)
- International Bonds (no current Vanguard availability; mutual funds available)
- EM Bonds (no current Vanguard availability; mutual funds available)

Cheers,
Eric

[BornInBoston]

Amazing job, and superb collaberative work on this spreadsheet.

Question: is there any rebalancing involved in these calculations? Can't seem to find a reference to rebalancing. Sorry if I missed it. Lee

[Cb]

[gummy]

[edge]

Maybe I am missing something but it seems that nearly every calcuation of correlation is using a wrong column or all the columns in many of the correlation calcutaions are wrong in 5m.

[gummy]

The latest-and-greatest is available here:
http://www.gummy-stuff.org/Simba.htm

Simba has made a number of changes.
Check it out.

[edge]

I think the correlation numbers are wrong in this one too :p (?)

[simba]

[johnb]

Any chance of an unprotected version? I'm not able to change the blue cells on the newest version of the file. I'm on a Mac.

[gummy]

Simba's rev5p is now here:
http://www.gummy-stuff.org/Exc....cktest.xls

The "portfolio" sheet is unprotected.

[johnb]

Thanks Gummy!

[edge]

I think the data source for EM has a developed market index listed - this does not seem correct.

[simba]

[edge]

Simba,

Ya, I checked it myself and the actual data seemed fine

[gbs]

Simba,

I think it will be interesting to add the results for the un-rebalanced portfolio as well.

I did some testing on my own and in most cases for an all stock portfolio the returns as well as stdev go up.

gbs

[fundtalker123]

Ok, math-stat wizzes, I've got a question:

Suppose you've got this marvelous spreadsheet going and you're compulsively diddling around your asset allocation (heaven forbid, maybe you're even started messin' with SCV, EM, REITS, and Commodities). After diddling for 5 hours you get your Std. Dev. to PLUMMET from 13.8% to 12.8% and, at the same time, your CAGR SKYROCKETS from 10.8% to 11%!

How do you judge whether this change is statistically significant? It seems like some statistical test is in order. If there's a 55%/45% chance that my new portfolio is better/worse than my old one, I probably wouldn't bother making a change. But if it's 80%/20%, that might get me thinkin'. Any way to estimate this?

[BornInBoston]

When I try to put 100% in TSM (first item in asset list) I get error messages. Why won't the SS let me do this? Other combinations work fine, by the way.

[simba]

[gbs]

Thanks Simba!

gbs

[fundtalker123]

Countour plots of sharpe ratio and compound annual return calculated from the 35 yr data, comparing various mixes of bonds and stocks, with various international, REIT, small cap value tilts, or with slice-dice are posted here:

http://www.gummy-stuff.org/FundTalker.htm

(the plots were done in Matlab and I don't know how to incorporate that in the Excel spreadsheet)

[edge]

Hi,

I think some of the "real" returns are wrong, looks like one of the columns used in the equation are wrong.

It would be better if the inflation column was $'ed so the equation could just be copied/pasted.

A minor issue, one of the graph legend has "rebalanced" portfolio when it should be "unrebalanced"

Edited:

P2 P3 P4 P5 in the portfolio comparision section

Real returns are the same as nominal returns.

[sterjs]

Interesting Result: Commodities don't improve Sharpe Ratios much for diversified portfolios, but they improve Sortino Ratios substantially.

I also messed around with the allocations and produced a portfolio that never had a losing year:

65% ST Treasuries
15% Commodities
10% U.S. Small Value
05% EAFE Value
05% Emerging Markets

CAGR 10.01%
Std. Dev. 4.62%
Sharpe 0.87
Sortino 2.97

P.S. The Intl Value looks strange to me... was there really only a .27% Value premium in EAFE from 72-2006?

[simba]

[simba]

[jms969]

Here is a nice link to some excellent excel add-ins.

I am trying to apply the linear programming example to your spreadsheet to be able to change constraints and have it find an optimal solution. Solver only goes so far

http://www.me.utexas.edu/~jens....index.html

PS. Gummy you should like these
_________________
I want to die peacefully in my sleep like my grandfather, not screaming like the passengers in his car.

[gummy]

Alas, I can never seem to run Simba's spreadsheets after downloading.

Hmm ... gotta take a look at them add-ins.

[sterjs]

1985*-2006 Mid Cap Value, Growth

MC Value
0.32
0.18
-0.02
0.25
0.23
-0.16
0.38
0.22
0.16
-0.02
0.35
0.2
0.34
0.05
0.02
0.19
0.02
-0.1
0.38
0.24
0.13
0.2

MC Growth
0.32
0.18
0.03
0.13
0.32
-0.05
0.47
0.09
0.11
-0.02
0.34
0.18
0.23
0.18
0.51
-0.12
-0.2
-0.27
0.43
0.16
0.12
0.11

* MC Blend returns were used for 1985.

Source 1

Source 2

[simba]

Latest version rev6d can be downloaded here.

This includes Mid-Cap growth & Mid-Cap Value.

[Peppe]

Can you add VG extended market or other S&P completion type index? My 401k doesn't have total stock market, but has S&P 500 and the Russell small cap completion index. I used mid cap blend in place of it, but the completion index is more volatile than the VG mid cap.

Thanks for all your hard work this spreadsheet is fun to tinker with and is very helpful.

[simba]

[Zapped]

Has anyone sucessfully loaded the spreadsheet in OpenOffice? I'm using release 2.0.2 and even after enabling macros, it's not working correctly. I can't edit the blue boxes (OO says their protected cells), and the two graphs on the Portfolio sheet ("Portfolio Growth (Nominal) 19XX-2006") have nothing drawn in them.

I have access to Excel but I'm not a registered owner myself so I prefer to use OpenOffice. If anyone has experience getting Excel spreadsheets to work in OO I'd appreciate a conversion of Simba's latest rev6e.
_________________
- Jim in Austin, TX

[kaesler]

Regarding OpenOffice I think I found that if I used Excel to remove the cell locking I could then use it in OpenOffice. Give that a try?

[CyberBob]

[LH]

I did as bob said, and OO.org spreadsheet allowed me to enter values, and the spreadsheet generated a graph and everything.

Often times, as with gummys spreadsheets, openoffice does not work with excel macros.

Also, I am using the Novell form of openoffice, which has extra excel macro support versus the regular openoffice. Often times, even with Novell openoffice, gummys spreadsheets do not work : ( But they are specifically working towards increasing the macro capability as I understand it.

If gummy and simba excel macro type spreadsheets are what you are trying to run using openoffice.org, I recommend downloading the novell form of openoffice.org from below. You will get less macro errors.

http://www.novell.com/products....s/ooo.html

http://www.novell.com/news/pre....perability