I don't understand why my historical analysis is different between scenarios.
My inputs...
Created scenario 1. Copied scenario 1 to both scenario 2 and 3.
Ran historical analysis. Results match exactly.
Change scenario 2 & 3 rates of return in simplified portfolio modeling. All else stays the same as scenario 1.
Run historical analysis. Scenario 1 stays the same. Scenario 2 and 3 now produce different results.
Why would historical analysis be effected by what I choose for rates of return?
Am I wrong in assuming that my rates of return should only effect a monte carlo simulation, and that historical analysis should not be effected?
Please help me understand.
@bakes7bgmail-com This is because we syhthesize additional test cases by using your specified returns in the latter years of the test cases that don't have enough historical data to cover the entire modeling period. The most relevant returns are in the early years and we always use true historical returns for those. You can read the details in the user manual.
Stuart
Yes the Pralana "historic" is more of a hybrid. In a 40 year plan, if my calculations are correct, about 10% of the individual year returns consist of one's projected ROR, the rest are historic runs.
