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A Quantitative Approach to Tactical Asset Allocation

Mebane T. Faber
The Journal of Wealth Management Spring 2007, 9 (4) 69-79; DOI: https://doi.org/10.3905/jwm.2007.674809
Mebane T. Faber
The managing director and portfolio manager at Cambria Investment Management, Inc. in Los Angeles, CA.
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  • For correspondence: mf@cambriainvestments.com
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Abstract

This article presents a simple quantitative method that improves risk-adjusted returns across various asset classes. A moving-average timing model is tested in-sample on the United States equity market and out-of-sample on more than twenty additional domestic and foreign markets. The approach is then examined since 1972 in an allocation framework utilizing a combination of diverse and publicly traded asset class indices, including the Standard and Poor's 500 Index (S&P 500), Morgan Stanley Capital International Developed Markets Index (MSCI EAFE), Goldman Sachs Commodity Index (GSCI), National Association of Real Estate Investment Trusts Index (NAREIT), and United States Government 10-Year Treasury Bonds. The empirical results are equity-like returns with bond-like volatility and drawdown, and over thirty consecutive years of positive performance.

TOPICS: Security analysis and valuation, statistical methods, mutual funds/passive investing/indexing, performance measurement

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The Journal of Wealth Management
Vol. 9, Issue 4
Spring 2007
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A Quantitative Approach to Tactical Asset Allocation
Mebane T. Faber
The Journal of Wealth Management Jan 2007, 9 (4) 69-79; DOI: 10.3905/jwm.2007.674809

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A Quantitative Approach to Tactical Asset Allocation
Mebane T. Faber
The Journal of Wealth Management Jan 2007, 9 (4) 69-79; DOI: 10.3905/jwm.2007.674809
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