Citations (2)



Relative Strength Strategies for Investing

Mebane T. Faber

Cambria Investment Management

April 1, 2010

The purpose of this paper is to present simple quantitative methods that improve risk-adjusted returns for investing in US equity sectors and global asset class portfolios. A relative strength model is tested on the French-Fama US equity sector data back to the 1920s that results in increased absolute returns with equity-like risk. The relative strength portfolios outperform the buy and hold benchmark in approximately 70% of all years and returns are persistent across time. The addition of a trend-following parameter to dynamically hedge the portfolio decreases both volatility and drawdown. The relative strength model is then tested across a portfolio of global asset classes with supporting results.

Number of Pages in PDF File: 22

Keywords: Tactical Asset Allocation, Stocks, Bonds, Real Estate, Quantitative, Momentum, ETFs, Commodities, GTAA

JEL Classification: G11, C10, C50, E00

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Date posted: April 6, 2010 ; Last revised: April 20, 2010

Suggested Citation

Faber, Mebane T., Relative Strength Strategies for Investing (April 1, 2010). Available at SSRN: http://ssrn.com/abstract=1585517 or http://dx.doi.org/10.2139/ssrn.1585517

Contact Information

Mebane T. Faber (Contact Author)
Cambria Investment Management ( email )
2321 Rosecrans Ave
Suite 4270
El Segundo, CA 90245
United States
HOME PAGE: http://www.cambriainvestments.com
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