Hi,
I was just wondering if you could implement rescaling a system by removing Cash (sortof dividend payment). Problem is that rescaling is not possible without closing all open positions.
so e.g. a system that has starting cash 100,000 at t=1, 120,000 at t=2 and 144,000 at t=3 has an internal rate of return of 20%. Now if the same system had paid a dividend of 10,000 after t=2 cash at t=3 would be 134,000.
So problem is the chart… but if you change it from $ to % and include the dividends there is no problem. no?
t=1 100%, t=2 120%, t=3 144% (from (134000/120000 + 10000/120000) * 120%)
Now, if in the subsequent period you earn 15,000 then you have
15000/134000 = 11.2% in the dividend system (ending 144% + 11.2% = 155.2%) and 15000/144000 = 10.4% in the non dividend system (ending 154.4%) as a result of having more respectively less cash invested.
Christian
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