Meb Faber Research – Stock Market and Investing Blog

Readers have been emailing me about the returns of the models I have presented in the last few posts. Rather than respond to all of them individually, I thought I would just post the year by year returns for the S&P500, the 1-Year MO model, the 1-Month MO model, and a combo of the two models. Recall that no...

What about a strategy that is a bit more active? In this follow up to "Simple Cross-Market Momentum", I take a look at a shorter time-frame - 1 month momentum. The strategy selects the market for the following month with the highest absolute return the previous month. As in the previous study, the strategy is examined since 1972 utilizing...

Fundadvice.com has a plethora of articles on buy-and-hold investing, as well as market timing.A couple of my favorites:Buy and Hold ArticlesThe Ultimate Buy and Hold PortfolioThe Perfect PortfolioMarket Timing ArticlesAll About Market TimingMarket Timing: The Rest of the StoryDo You Have What it Takes to be a Successful Market Timer?Lots more info on there for retirement, etc. . .

Below I will present a simple quantitative method that exploits momentum in relative returns across a wide set of asset classes. The strategy is examined since 1972 in an allocation framework utilizing a combination of diverse and publicly traded asset class indices including US Stocks (S&P 500), Foreign Stocks (MSCI EAFE), Commodities (GSCI), REITs (NAREIT), Cash (90-Day Commercial Paper),...

In the Goldman Sachs GTAA primer linked below, they describe some empirical evidence of GTAA using valuation and momentum factors. They form equal weighted portfolios withing each asset class (equities, fixed income, and currencies) based on 1 - Valuation based on Price to Book (P/B) for equities, yield curve for fixed income, and purchasing power parity for currencies, and...

Essentially, GTAA is market timing. Historical evidence has provided a mixed bag of evidence of the ability of market timers. One of the best literature reviews of the subject is "Evaluating a stock market timing strategy: the case of RTE Asset Managment" by Tezel and McManus .

The focus on the blog thus far has been a passive buy and hold approach to investing - esentially, how you divy up your pie into slices of world asset classes. However, an active approach to asset allocation may offer some value. Tactical Asset Allocation is defined by Investopedia as an"active management portfolio strategy that rebalances the percentage of...

The Nasdaq Composite since 1972 has had two declines over - 50% (- 58% from 1972-1974, - 75% from 2000-2002). The chart doesn't look so bad because it is logarithmic. . .What about the other major asset classes? Below is a table of 5 major asset classes: US Equities, Foreign Equities, US Government Bonds, REITs, and Commodities. Since...

“The first rule is not to lose. The second rule is not to forget the first rule.”- Warren BuffettHow many investors remember the stock market decline of 2000-2002? If you had your portfolio invested in the DJIA, you sat through a ~ -38% decline. Preferred the Nasdaq? You experienced a - 75% decline (sorry to bring up those painful...

According to the latest updates from the two largest university endowments, Harvard and Yale, the percentages they allocate to various asset classes are located in table below. While the average retail investor does not have access to private equity and hedge funds, he can invest in the remaining five asset classes through publicly traded vehicles like ETF’s and mutual...