Short sell with backtest Engine

Question

ando 2021-1-15

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评论： Tim Billingsley 2021-8-31

What's the most effecient way to implement short selling strategies with the backtestEngine?

Using this Matlab example as a reference: https://www.mathworks.com/help/finance/backtest-investment-strategies-with-trading-signals.html

It appears that if you change crossoverRebalanceFcn to output negative portfolio weights, for example

change

new_weights(idx) = availableCapital / uninvestedAssets;

to

new_weights(idx) = -availableCapital / uninvestedAssets;

That seems to work. Is that the correct way to implement a short? Any other considerations with this approach or is there a better approach?

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Answer 1

Brendan 2021-1-20

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hello again Ando,

Yes, that is how you take short positions using the backtestEngine. You just set a negative weight on an asset. Since the total weights should equal to 1, shorting an asset will mean you have additional weight to allocate to long positions, or else the unallocated weight will stay in cash earning the RiskFreeRate.

cheers,

-brendan

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Tim Billingsley 2021-8-31

Is the backtestEngine really set up to handle short positions? When I have negative weights on an asset, there are intermediate buy and sell costs and also unaccounted for Turnover values?

Regards

Tim

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