Backtesting a Simple Stock Trading Strategy 2

1. Functions.R

rm(list = ls(all = TRUE))

daysSinceHigh <- function(x, n){
   apply(embed(x, n), 1, which.max)-1
}

myStrat <- function(x, nHold=100, nHigh=200) {
	position <- ifelse(daysSinceHigh(x, nHigh)<=nHold,1,0)
	c(rep(0,nHigh-1),position)
}

Performance <- function(x) {

	cumRetx = Return.cumulative(x)
	annRetx = Return.annualized(x, scale=252)
	sharpex = SharpeRatio.annualized(x, scale=252)
	winpctx = length(x[x > 0])/length(x[x != 0])
	annSDx = sd.annualized(x, scale=252)
	
	DDs <- findDrawdowns(x)
	maxDDx = min(DDs$return)
	maxLx = max(DDs$length)

	
	Perf = c(cumRetx, annRetx, sharpex, winpctx, annSDx, maxDDx, maxLx)
	names(Perf) = c("Cumulative Return", "Annual Return","Annualized Sharpe Ratio",
		"Win %", "Annualized Volatility", "Maximum Drawdown", "Max Length Drawdown")
	return(Perf)
}

2. Analysis.R

testStrategy <- function(symbol, nHold=100, nHigh=200, cost=.005, ylog=FALSE, wealth.index = FALSE, ...) {
	require(quantmod)
	
	#Load Data
	myStock <- getSymbols(symbol,from='1900-01-01')
	myStock <- adjustOHLC(get(myStock),symbol.name=symbol)
	myStock <- Cl(myStock)
	
	#Determine position
	myPosition <- myStrat(myStock,nHold,nHigh)
	bmkReturns <- dailyReturn(myStock, type = "arithmetic")
	myReturns <- bmkReturns*Lag(myPosition,1)
	myReturns[1] <- 0
	names(bmkReturns) <- symbol
	names(myReturns) <- 'Me'
	
	#Add trading costs
	trade =  as.numeric(myPosition!=Lag(myPosition,1))
	trade[1] = 1
	trade = trade*cost
	myReturns = myReturns-trade
	
	#Make plot
	require(PerformanceAnalytics)
	symbol <- sub('^','',symbol,fixed=TRUE)
	Title <- paste('High=',nHigh,' Hold=',nHold,' on ',symbol,sep='')
	if (ylog) {wealth.index = TRUE}
	layout(matrix(c(1, 2, 3)), height = c(2, 1, 1.3), width = 1)
	par(mar = c(1, 4, 4, 2))
	chart.CumReturns(cbind(bmkReturns,myReturns), main=Title, ylab = "Cumulative Return",
						wealth.index = wealth.index,ylog=ylog,...)
	chart.RelativePerformance(myReturns,bmkReturns, ylab = "Relative Return", main = "")
	chart.Drawdown(cbind(bmkReturns,myReturns),legend.loc = 'bottomleft', ylab = "Drawdown", main = "")
	
	#Return Benchmarked Stats
	cbind(Me=Performance(myReturns),Index=Performance(bmkReturns))
}

testStrategy('^GSPC',100,200,ylog=TRUE)
testStrategy('^FTSE',100,200)
testStrategy('^DJI',100,200,ylog=TRUE)
round(testStrategy('^N225',100,200),8)
testStrategy('EEM',100,200)
testStrategy('EFA',100,200)
testStrategy('GLD',100,200)

3. Results.txt

GSPC (US Large Cap):
                                   Me         Index
Cumulative Return         68.11285310   71.15426170
Annual Return              0.07114901    0.07189781
Annualized Sharpe Ratio    0.61792340    0.46535064
Win %                      0.54320873    0.53242454
Annualized Volatility      0.11514213    0.15450243
Maximum Drawdown          -0.33509517   -0.56775389
Max Length Drawdown     1378.00000000 1898.00000000

FTSE (UK and Ireland):
                                   Me        Index
Cumulative Return          3.27952156    3.8404476
Annual Return              0.05421708    0.0589431
Annualized Sharpe Ratio    0.43879933    0.3298633
Win %                      0.53084556    0.5239884
Annualized Volatility      0.12355779    0.1786895
Maximum Drawdown          -0.40641281   -0.5256991
Max Length Drawdown     2415.00000000 2960.0000000

DJI (US Large Industrial):
                                   Me         Index
Cumulative Return         54.43942856   46.53410275
Annual Return              0.04975879    0.04780746
Annualized Sharpe Ratio    0.39209260    0.25940805
Win %                      0.53114609    0.52286637
Annualized Volatility      0.12690571    0.18429444
Maximum Drawdown          -0.47873652   -0.89185928
Max Length Drawdown     2939.00000000 6301.00000000

N225 (Japan):
                                   Me         Index
Cumulative Return          1.19191792   -0.12146268
Annual Return              0.02944405   -0.00477699
Annualized Sharpe Ratio    0.20219646   -0.02053661
Win %                      0.52668464    0.51337842
Annualized Volatility      0.14562099    0.23260863
Maximum Drawdown          -0.48041098   -0.81871261
Max Length Drawdown     5342.00000000 5342.00000000

EEM (Emerging Markets):
                                 Me       Index
Cumulative Return         1.3516523   2.6866421
Annual Return             0.1067269   0.1673357
Annualized Sharpe Ratio   0.4699541   0.4733869
Win %                     0.5393333   0.5437766
Annualized Volatility     0.2271008   0.3534862
Maximum Drawdown         -0.2623762  -0.6709596
Max Length Drawdown     488.0000000 980.0000000

EFA (Developed Markets):
                                  Me        Index
Cumulative Return         0.46097518   0.37854022
Annual Return             0.03845159   0.03246626
Annualized Sharpe Ratio   0.23270321   0.12961493
Win %                     0.53257143   0.53269537
Annualized Volatility     0.16523875   0.25048242
Maximum Drawdown         -0.25703652  -0.61761011
Max Length Drawdown     589.00000000 980.00000000

GLD (Gold):
                                 Me       Index
Cumulative Return         1.7309002   2.9607932
Annual Return             0.1583762   0.2231517
Annualized Sharpe Ratio   0.9378088   1.0499845
Win %                     0.5548335   0.5519860
Annualized Volatility     0.1688790   0.2125286
Maximum Drawdown         -0.2326084  -0.2941414
Max Length Drawdown     433.0000000 379.0000000