Relative Strength Strategies for Investing

22 Pages Posted: 6 Apr 2010 Last revised: 20 Apr 2010

See all articles by Meb Faber

Meb Faber

Cambria Investment Management

Date Written: 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.

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

JEL Classification: G11, C10, C50, E00

Suggested Citation

Faber, Meb, Relative Strength Strategies for Investing (April 1, 2010). Available at SSRN: or

Meb Faber (Contact Author)

Cambria Investment Management ( email )

2321 Rosecrans Ave
Suite 4270
El Segundo, CA 90245
United States


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