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You are here: Home / ITA Portfolios / Kahneman-Tversky Portfolio / Kahneman-Tversky Portfolio Review: 29 April 2022

Kahneman-Tversky Portfolio Review: 29 April 2022

April 30, 2022 By HedgeHunter Leave a Comment

Kahneman-Tversky Portfolio Review: 29 April 2022 1

Hippos taking a bath

The Kahneman-Tversky is a Dual Momentum (DM) portfolio that is split into two portions – one using a long look-back (slow) period and one using a shorter term (fast) look-back periods to measure momentum. Performance over the past 16 months looks like this:

Kahneman-Tversky Portfolio Review: 29 April 2022 2and is underperforming the benchmark AOR fund as a result of using TSLOs in 2020. So, it’s not that the DM system isn’t working – just that it may be better to allow the momentum filtering to determine portfolio holdings rather than to actively try to manage losses by using stop-loss orders. Note that, although there have been deviations in performance as a result of the different look-back periods, the 16 month returns are essentially the same at this point.

The rotation graphs show the differences resulting from the different look-back periods. For the long-term (Kahneman) portion of the portfolio:

Kahneman-Tversky Portfolio Review: 29 April 2022 3…. relatively separated and smooth. Whilst the faster (Tversky) portion looks like this:

Kahneman-Tversky Portfolio Review: 29 April 2022 4where we are seeing a turn-around in the short term.

Irrespective of which time-scale we may prefer, the end result is the same:

Kahneman-Tversky Portfolio Review: 29 April 2022 5The Kahneman portion is recommending VTI, as is the Tversky portion:

Kahneman-Tversky Portfolio Review: 29 April 2022 6The only difference is that the short term (Tversky) portion is ranking VEU higher than TLT – however, since the DM model selects only the strongest performing asset, VTI is recommended for both portions. Since VTI is currently held in both portions there will be no adjustments this month.

David

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Filed Under: Kahneman-Tversky Portfolio, Portfolio Management, Portfolio Performance Tagged With: Kahneman-Tversky Portfolio, Portfolio Management, Portfolio Performance

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