I want to take another look at mimicking UPRO going back to 1913. Of course, UPRO didn’t arrive until around 2010, but with a little math and coding we can simulate what a similar set of holdings may have been like since 1913.
In blue you can see actual UPRO. In green you can see an estimate of SPXTR (the total S&P 500 return with dividends reinvested). In red we can see a synthetic UPRO calculated using 3 times the monthly return of SPXTR. An obvious problem with that is that it doesn’t account for leverage costs of expense ratios. To make a simple estimate as shown in yellow I have taken the SPXTR monthly return, multiplied it by 3, subtracted a 1% annualized expense ratio, and subtracted 2 times the ten year treasury yield.
Now I know this isn’t a perfect calculation for a synthetic UPRO since institutions borrow at shorter term rates and the fund uses a daily multiplier not a monthly one. This is just a way among many of estimating and I have chosen inputs that will let us go back to 1913. The 2 year yield doesn’t go back that far in my data set.
Now that we we can see the rough estimate is atleast in the ballpark let’s look at the full length view going back to 1913 – which is the first year for US10Y data on tradingview.
Continue reading “Backtesting Blind Buying UPRO to 1913”
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