We explained our machine learning projections in Quantitative And Machine Learning Asset Analysis. Using the projected expectancy, defined as (up fraction*median gain) – (down fraction*abs(median loss)), as a raw weight, we can combine such information for a given portfolio to derive weights for long_short and long + cash portfolios. The difference between the two is that in the latter, short positions are set to flat with the resulting weights combined and deployed as cash.
We use a version of Mebane Faber’s Global Asset Allocation portfolio to illustrate projected expectancy derived weights.
Mebane Faber Global Asset Allocation Portfolio
| LQD | iShares iBoxx $ Investment Grade Corporate Bond ETF |
| SPY | SPDR S&P 500 ETF |
| BNDX | Vanguard Total International Bond ETF |
| EFA | iShares MSCI EAFE ETF |
| TLT | iShares 20+ Year Treasury Bond ETF |
| DBC | Invesco DB Commodity Index Tracking ETF |
| GLD | SPDR Gold Shares |
| EEM | iShares MSCI Emerging Markets ETF |
| VNQ | Vanguard Real Estate ETF |
| TIP | iShares TIPS Bond ETF |
| Weight Type | LQD | SPY | BNDX | EFA | TLT | DBC | GLD | EEM | VNQ | TIP | Cash | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Mebane Faber Global Asset Allocation | Default | 19.8 | 18.0 | 14.4 | 13.5 | 13.5 | 5.0 | 5.0 | 4.5 | 4.5 | 1.8 | 0.0 |
| DMA KNN Projections 21 Days | Long Short | -0.436 | 31.374 | -0.079 | 0.882 | 3.241 | 2.924 | 10.24 | 15.92 | 34.328 | 0.575 | 0.0 |
| DMA KNN Projections 21 Days | Long Cash | 0.0 | 31.374 | 0.0 | 0.882 | 3.241 | 2.924 | 10.24 | 15.92 | 34.328 | 0.575 | 0.515 |
| SMA - DMA - Breakout Shifted Random Forest Projections 63 Days | Long Short | -2.916 | 24.187 | 5.224 | 2.261 | 16.561 | 1.466 | 5.684 | 9.536 | 28.99 | 3.173 | 0.0 |
| SMA - DMA - Breakout Shifted Random Forest Projections 63 Days | Long Cash | 0.0 | 24.187 | 5.224 | 2.261 | 16.561 | 1.466 | 5.684 | 9.536 | 28.99 | 3.173 | 2.916 |
| SMA KNN Projections 63 Days | Long Short | 3.105 | 16.451 | 1.509 | 10.799 | 10.648 | 0.991 | 16.622 | 25.104 | 9.422 | 5.35 | 0.0 |
| SMA KNN Projections 63 Days | Long Cash | 3.105 | 16.451 | 1.509 | 10.799 | 10.648 | 0.991 | 16.622 | 25.104 | 9.422 | 5.35 | 0.0 |
| Bollinger Band - Breakout Shifted Random Forest Projections 63 Days | Long Short | -4.632 | 15.35 | -2.112 | 18.915 | 6.449 | 1.68 | -14.691 | 16.712 | 14.351 | -5.109 | 0.0 |
| Bollinger Band - Breakout Shifted Random Forest Projections 63 Days | Long Cash | 0.0 | 15.35 | 0.0 | 18.915 | 6.449 | 1.68 | 0.0 | 16.712 | 14.351 | 0.0 | 26.544 |
| Bollinger Band KNN Projections 63 Days | Long Short | -10.583 | 16.893 | 9.105 | -1.078 | 24.561 | -5.99 | 4.233 | 7.388 | 2.236 | 17.931 | 0.0 |
| Bollinger Band KNN Projections 63 Days | Long Cash | 0.0 | 16.893 | 9.105 | 0.0 | 24.561 | 0.0 | 4.233 | 7.388 | 2.236 | 17.931 | 17.652 |
| DMA KNN Projections 63 Days | Long Short | 2.503 | 35.965 | 2.452 | 6.523 | 2.654 | -1.467 | 15.548 | 4.423 | 17.332 | 11.133 | 0.0 |
| DMA KNN Projections 63 Days | Long Cash | 2.503 | 35.965 | 2.452 | 6.523 | 2.654 | 0.0 | 15.548 | 4.423 | 17.332 | 11.133 | 1.467 |
| Bollinger Band - Breakout Shifted Random Forest Projections 21 Days | Long Short | 10.434 | 10.197 | 10.75 | 12.308 | 9.744 | 3.333 | 5.168 | 32.051 | 2.939 | 3.077 | 0.0 |
| Bollinger Band - Breakout Shifted Random Forest Projections 21 Days | Long Cash | 10.434 | 10.197 | 10.75 | 12.308 | 9.744 | 3.333 | 5.168 | 32.051 | 2.939 | 3.077 | 0.0 |
| Bollinger Band KNN Projections 21 Days | Long Short | 7.979 | 10.672 | 17.011 | 11.482 | 6.582 | 10.794 | 7.635 | 12.313 | 12.738 | 2.795 | 0.0 |
| Bollinger Band KNN Projections 21 Days | Long Cash | 7.979 | 10.672 | 17.011 | 11.482 | 6.582 | 10.794 | 7.635 | 12.313 | 12.738 | 2.795 | 0.0 |
| SMA - DMA - Breakout Shifted Random Forest Projections 21 Days | Long Short | 5.671 | 13.923 | 1.166 | 11.136 | 3.229 | 14.067 | 8.562 | 10.171 | 24.479 | 7.596 | 0.0 |
| SMA - DMA - Breakout Shifted Random Forest Projections 21 Days | Long Cash | 5.671 | 13.923 | 1.166 | 11.136 | 3.229 | 14.067 | 8.562 | 10.171 | 24.479 | 7.596 | 0.0 |
| SMA KNN Projections 21 Days | Long Short | 5.315 | 17.701 | 1.788 | 12.293 | 13.764 | 10.03 | 10.626 | 14.109 | 12.958 | 1.415 | 0.0 |
| SMA KNN Projections 21 Days | Long Cash | 5.315 | 17.701 | 1.788 | 12.293 | 13.764 | 10.03 | 10.626 | 14.109 | 12.958 | 1.415 | 0.0 |
The tables above can be downloaded from: Mebane Faber Global Asset Allocation Projection Weights.zip.
If you wish to see such information provided each market day for this and other popular portfolios, leave a comment on the Substack version of this post. If there is sufficient interest we will do so.
