22 Pages Posted: 6 Apr 2010 Last revised: 20 Apr 2010
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: Suggested Citation
By Kent Daniel