S&P vs SPY

[jedi767]

I have run your evaluation edition a number of times using price data on SPY vs the S&P 500 model and cannot produce returns with SPY that are commensurate with S&P 500 returns.  The best SPY models were only just above 50% FDA vs about 54% FDA on S&P data. Can you explain this?  If I were to use the full edition would it be better to make buy/sell decisions of SPY using the S&P 500 model to generate trades?

[Jim Witkam]

SPY price data only goes back to 1993, its inception year.
For the S&P 500 index, data since 1950 is used. This provides a much longer learning period and covers more diverse market behavior. Models need sufficient evolution time to achieve robust performance.

Since SPY price changes are almost perfectly correlated with S&P500 price changes, you can use a S&P500 model to create signals for SPY.