Comments on: Improving the Timing Model http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/ Stock Market and Investing Blog of Mebane Faber Tue, 11 Oct 2011 15:24:53 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Mebane Faber http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/comment-page-1/#comment-1271 Mebane Faber Tue, 20 Mar 2007 18:05:00 +0000 http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/#comment-1271 Anon - Yes I follow similar models in our RIA.<br/><br/>Tomk - 2x represents the leveraged model (2:1 leverage including the broker call rate) Anon – Yes I follow similar models in our RIA.

Tomk – 2x represents the leveraged model (2:1 leverage including the broker call rate)

]]> By: tom k http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/comment-page-1/#comment-1270 tom k Tue, 20 Mar 2007 17:58:00 +0000 http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/#comment-1270 I'm confused. What is the Timing 2X column? The Std Dev skyrocketed and the Sharpe dropped dramatically. I’m confused. What is the Timing 2X column? The Std Dev skyrocketed and the Sharpe dropped dramatically.

]]> By: Anonymous http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/comment-page-1/#comment-1269 Anonymous Mon, 19 Mar 2007 03:10:00 +0000 http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/#comment-1269 Interesting elaboration on your approach, but if you're going to go in the direction of a little more complexity why not use tactical asset allocation with a large universe of assets, namely the constituent parts. And, I will postulate that the market environments, defined by depth of corection in total mkt averages, can be matched to different roc periods for optimal return. Gosh, there are so many parameters to play with. Are you putting any of your models, or featurs of your models to work as a money mgr? Interesting elaboration on your approach, but if you’re going to go in the direction of a little more complexity why not use tactical asset allocation with a large universe of assets, namely the constituent parts. And, I will postulate that the market environments, defined by depth of corection in total mkt averages, can be matched to different roc periods for optimal return. Gosh, there are so many parameters to play with. Are you putting any of your models, or featurs of your models to work as a money mgr?

]]> By: Mebane Faber http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/comment-page-1/#comment-1267 Mebane Faber Fri, 16 Mar 2007 19:19:00 +0000 http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/#comment-1267 More positions will increase transaction costs. However, the system is fairly inactive, and results in less than one round-trip trade per asset class per year.<br/><br/>Most investors rebalance their portfolio periodically, so this amount of trading should not affect results that much- but obvsiously depends on the investors account size and trading costs.<br/><br/>Many mutual funds at brokerages such as Fido have 0 trading cost funds.<br/><br/>I don't really advocate shorting. You get compensated for owning risk premia, that what capital markets are formed on. You have to beat a bogey (bond yield, which currently is around 5%), and do so with less risk. . .Add in the fact you may or may not receive short rebates, etc. But, I have not spent much time testing the theory either. More positions will increase transaction costs. However, the system is fairly inactive, and results in less than one round-trip trade per asset class per year.

Most investors rebalance their portfolio periodically, so this amount of trading should not affect results that much- but obvsiously depends on the investors account size and trading costs.

Many mutual funds at brokerages such as Fido have 0 trading cost funds.

I don’t really advocate shorting. You get compensated for owning risk premia, that what capital markets are formed on. You have to beat a bogey (bond yield, which currently is around 5%), and do so with less risk. . .Add in the fact you may or may not receive short rebates, etc. But, I have not spent much time testing the theory either.

]]> By: Anonymous http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/comment-page-1/#comment-1266 Anonymous Fri, 16 Mar 2007 18:44:00 +0000 http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/#comment-1266 In looking at your timing models, it appears that, as long as there is some diversification benefit, it will always be better to have more positions rather than fewer simply because a greater percentage of one's assets are more likely to be invested at any given time. <br/><br/>Given that, could you (or have you) considered short exposure to the same positions using the same methodology? For example, lets say I used SH (short SP500) as essentially it's own asset class - going 'long' the inverse using the same 10 month sma triggers. Is there a reason this wouldn't work? In looking at your timing models, it appears that, as long as there is some diversification benefit, it will always be better to have more positions rather than fewer simply because a greater percentage of one’s assets are more likely to be invested at any given time.

Given that, could you (or have you) considered short exposure to the same positions using the same methodology? For example, lets say I used SH (short SP500) as essentially it’s own asset class – going ‘long’ the inverse using the same 10 month sma triggers. Is there a reason this wouldn’t work?

]]> By: Ed http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/comment-page-1/#comment-1265 Ed Fri, 16 Mar 2007 18:43:00 +0000 http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/#comment-1265 Something to consider is the increase in transaction costs. Mebane, in your testing do you normally account for commissions? Keep up the great work! Something to consider is the increase in transaction costs. Mebane, in your testing do you normally account for commissions? Keep up the great work!

]]> By: Anonymous http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/comment-page-1/#comment-1264 Anonymous Fri, 16 Mar 2007 16:29:00 +0000 http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/#comment-1264 Suppose that you work 25 positions in the same way. Won't the number of trades go up too? Maybe the increased cost of trading eats up the improvement? Suppose that you work 25 positions in the same way. Won’t the number of trades go up too? Maybe the increased cost of trading eats up the improvement?

]]> By: Mebane Faber http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/comment-page-1/#comment-1262 Mebane Faber Thu, 15 Mar 2007 22:40:00 +0000 http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/#comment-1262 Apologies, about every fifth post Blogger deletes all of our pics after a few hours. I have no idea why it does this. . . Apologies, about every fifth post Blogger deletes all of our pics after a few hours. I have no idea why it does this. . .

]]> By: Anonymous http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/comment-page-1/#comment-1261 Anonymous Thu, 15 Mar 2007 16:56:00 +0000 http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/#comment-1261 ditto - no images visible ditto – no images visible

]]> By: Anonymous http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/comment-page-1/#comment-1260 Anonymous Thu, 15 Mar 2007 16:20:00 +0000 http://www.mebanefaber.com/2007/03/14/improving-the-timing-model/#comment-1260 It seems the graphes don't show properly. It seems the graphes don’t show properly.

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