This is a test of two stock market seasonality strategies from Fred Piard’s book Quantitative Investing: Strategies to Exploit Stock Market Anomalies for All Investors. Strategy results from 1970 follow. Results are net of transaction costs – see backtest assumptions. Learn about what we do and follow 90+ asset allocation strategies like this one in […]
TAA Analysis
Front Running Commodity Seasonality
This is an independent test of a series of interesting studies from Quantpedia (here and here) related to seasonality in commodity ETFs. We’ve more than doubled the length of the author’s original test using relevant index data (1). Test #1: Front running commodity seasonality In all of our tests, we will be trading the same […]
Is Goldman Sachs’ 3% Annual Return Forecast Based on Bad Data?
This paper from Goldman Sachs made big headlines a couple of months back for forecasting an abysmal 3% nominal annual return for US stocks in the coming decade. For anyone who didn’t read GS’s analysis, the biggest contributor to that poor return was “market concentration”, or the market cap of the largest stocks relative to the […]
Pragmatic Asset Allocation from Vojtko and Javorská of Quantpedia
This is a test of Pragmatic Asset Allocation from Vojtko and Javorská of Quantpedia. While the strategy is “tactical” (i.e. changes allocation over time in response to market conditions), it’s also designed to ensure tax efficiency. We track many tactical strategies that have been tax efficient, but none that enforce that efficiency through explicit rules […]
Is Month-End Still the Best Time to Trade Tactical Strategies?
Most Tactical Asset Allocation (TAA) strategies trade just once per month. Strategy developers almost always assume trades are executed on the last trading day of the month. A unique feature of our platform is the ability to follow these strategies on any other day of the month as well. We’re not simply executing the same […]
Tactical Asset Allocation and Taxes: FIFO vs LIFO Deep Dive
This is a deep dive into which share disposal method – FIFO or LIFO – would have been more tax advantageous for the 80+ asset allocation strategies we track. When selling shares FIFO (first in, first out), the oldest shares held are sold first. When selling LIFO (last in, first out), the most recently purchased […]
Make Things Easy on Yourself: “Roll Up” Small Asset Positions
Here are some things we know about Tactical Asset Allocation: (Learn more: What is TAA?) We shouldn’t go 100% “all in” on just one TAA strategy. That introduces “specification risk”, or the risk that we’ve bet on an underperforming horse. Instead, we should combine multiple strategies together into what we call Model Portfolios. When trading […]
European Investors and TAA Strategies: Four Approaches
We track 80+ Tactical Asset Allocation (TAA) strategies, most of which were designed from the perspective of a US investor trading US ETFs. Most European investors can’t access US ETFs, instead trading UCITS funds listed on non-US exchanges, often denominated in currencies other than USD. In this post we’ll provide data analyzing four approaches a […]
Inflation and Stock/Treasury Correlation
There has been a surge in correlation between US stocks and Treasuries over the last couple of years. To illustrate, below we’ve shown the rolling 3-year correlation between US stocks and 10-year Treasuries since 1900 (based on monthly returns). Note the spike at the far right of the chart. What is correlation? In this context, […]
Long-term Returns for US Treasury Funds Are Predictable
Long-term returns for US Treasury bond funds with a constant maturity (like IEF, TLT and SHY) have been quite predictable simply using initial Treasury yields as an estimate. This observation was popularized by John Bogle. Here’s an excellent recent look from Portfolio Optimizer. How predictable? Below we’ve shown the intial yield on 10-Year US Treasury […]