I see that Meb Faber will be speaking at QuantCon. This algorithm implements his Global Tactical Asset Allocation (GTAA) as documented in "A Quantitative Approach to Tactical Asset Allocation" [http://papers.ssrn.com/sol3/papers.cfm?abstract_id=962461 ] , the Feb 1 2013 edition (pp. 29). The strategy rebalances 5 asset classes (SPY, EFA, TIP, GSG, VNQ) in equal percentages as follows:
- BUY RULE: Buy when monthly price > 10-month SMA.
- SELL RULE: Sell and move to cash when monthly price < 10-month SMA.
- The model is only updated once a month on the last day of the month.
- Cash returns are NOT estimated, and margin rates are NOT applied as no leveraged models are used. (*)
- Taxes are not modeled.
- Commissions, and slippage are included. (*)
- different from the paper.
The main goal of the strategy is implementable simplicity (not algorithmic) and to avoid drawdown over Buy and Hold, and this backtest achieves a 13% drawdown over the S&P 50% drawdown during the 2008 crash. Please double check my interpretation of the implementation and ETF selections.