Review on ‘A Quantitative Approach to Tactical Asset Allocation’ of Mebane T. Faber – Cambria Investment Management

Abstract:     
This Review shows that the gist of this article is that a simple moving average timing model is tested since 1900 on the United States equity market before testing since 1973 on other diverse and publicly traded asset class indices, including the Morgan Stanley Capital International EAFE 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.

When tested on various markets, risk adjusted returns were almost universally improved. Utilizing a monthly system since 1973, an investor would have been able to increase risk-adjusted returns by diversifying portfolio assets and employing a market – timing solution. The author has passed pricking remarks to make the investors realize the human psychology at different occasions. High volatility diminishes compound returns. An investor must be careful when pursuing leveraged returns.

Number of Pages in PDF File: 2

working papers series