GBA Workbench – Random Instrument Selection Strategy

This algorithm is useful for helping to assess the potential validity of a strategy which selects instruments from a portfolio and rejects others on each periodic re-allocation date such as the Momentum strategy.

Your strategy is compared to a series of tests which select instrumnents on a purely random basis. The example below compares the Momentum strategy to purely random instrument selection based on the same portfolio rebalanced in each case on the same dates.

In the histograms, the strategy being benchmarked is represented by the thinnest of the blue bars.

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