Welcome to Quantopian! That's a fascinating algo. I spent the couple hours on it ;) That's a sign of something that's got me interested!
There is a key difference between your implementation and the linked strategy, I think, is the monthly increase in funds. The linked assumes that you're increasing your amount to be invested every month - that you're taking part of your paycheck, presumably, and investing it. Quantopian doesn't really handle that well - we assume you start with a bucket of money, and we don't really model increases in the bucket. But anything is possible in Python ;)
So I took your line here:
context.target_value += 500 * context.expected_monthly_return
And I rewrote it as:
context.target_value = context.target_value * context.expected_monthly_return + context.monthly_add
I also built a "fake cash" system that, I think, tracks how much money you "have" if you pay into it every month.
The result was pretty fascinating. If you start it in January '08 like they did in their example, it works ok. But if you started in January '02, then 2008 breaks the model horribly - you go into negative "fake cash" by quite a bit.
I'm curious, outside of backtesting, what the theory is behind how this should or shouldn't work.
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