BACKGROUND

Introduction

Investors have long opposed bonds and equities in their portfolio, typically favouring equities when growth and inflation were expected to accelerate and over-weighting bonds when they anticipated an economic slowdown. The classic rule of thumb split in a portfolio was 60% for equities and 40% for bonds. However, the 60/40 portfolio has been challenged in recent years. This challenge aims to find a dynamic way to efficiently allocate between bonds and equities.

OBJECTIVES

Objective

Your objective is to adapt to market regime changes and correctly allocate between asset classes. Your portfolio only counts two assets, each representing one asset class: the S&P 500 future and the US 10 year treasury future. You can adopt two approaches to compose your portfolio: build a single market timing strategy on each individual asset and combine them in a portfolio with an equal contribution (in exposure term or in volatility term), or you can directly optimise allocations between the two assets at portfolio level.

Benchmark

We will compare your portfolio to the classic 60/40 portfolio composed of two assets, one building block for equities and one building block for bonds.

Investment universe

Your portfolio invests in the ESa (S&P 500 future - equity) building block and in the TYa (10Y Treasury future - bond) building block. It is a long only portfolio, meaning you can sell an asset you have already bought. In term of allocation function, the weights in your portfolio are postive, between 0 and 1. Some additional series can be used to generate allocations: the S&P index levels (OHLC), the VIX index and the 2-year and 10-year points on the US treasury yield curve.

Backtest period

December 2008 - December 2018

Constraints

NULL

DATA

ETF & INDICES

Symbol Description
ESa S&P 500 future building block
TYa 10 Year Treasury future building block
SPX Index S&P 500 index levels (Open / High / Low / Close)
VIX Index 1 month implied volatility on S&P 500 futures across strikes
2 Year US Treasury Yield 2 year US government yield
10 Year US Treasury Yield 10 year US Treasury yield

TIMELINE

ALPHATHON STARTS

16-Sep-2019

RESEARCH ENDS

16-Dec-2019

PAPER TRADING ENDS

16-Feb-2019

JURY & WINNER

Mar-2019

GET STARTED

Support tools

Tips and advice

  • You should use AlphienStudio to conduct your research.
  • Use the ?? operator in your AlphienStudio console to search the wiki. For example: > ??payout
  • Run forkTemplate('bondsOrEquities') in AlphienStudio to start working from the tutorial script. The same tutorial is available through Notebooks.

RULES

Awards

Terms and Conditions

Alphien's General Terms and Conditions apply.
In order to be awarded Alphien Quantitative Investment Certificate, your payout has to demonstrate:

  • Financial knowledge
  • Data science knowledge
  • Machine learning knowledge
  • Quantitative Strategy building knowledge

Learn more about Alphien QIS Certificate.

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