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Relative Strength Strategies for Investing


Relative Strength Strategies for Investing Mebane T. Faber - Portfolio Manager

The purpose of this paper is to present simple quantitative methods that improve risk-adjusted returns for investing in US equity sector 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 trendfollowing 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.

doc/20100418212437_Relative_Strength_Strategies_for_Investing_SSRN_id159040112.pdf


Relative Strength Strategies for Investing

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Categories : Finance    Themes : Investing
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