Test Market Timing Models

This tool allows you to test different market timing and tactical asset allocation models based on moving averages, momentum, market valuation and target volatility. The supported models include:

You can find a summary of the selected tactical asset allocation model below, and a more detailed description in the FAQ section.

Shiller PE Ratio Market Valuation

Shiller PE Ratio (PE10) market valuation based timing model adjusts the allocation between stocks and bonds as follows:
  • PE10 >= 22 - 40% stocks, 60% bonds
  • 14 <= PE10 < 22 - 60% stocks, 40% bonds
  • PE10 < 14 - 80% stocks, 20% bonds
The balanced 60% stock and 40% bond allocation is used as the benchmark portfolio.

Moving Averages - Single Asset

The moving average timing model is either invested in a a specific stock, ETF or mutual fund, or is alternatively in cash or other risk-free asset based on the moving average signal. The model is invested in the asset when the adjusted close price is greater than the moving average and the model moves to cash when the adjusted close price is less than the moving average. The model also supports using moving average cross-over as the signal.

Moving Averages - Portfolio Assets

The moving average model applies the moving average signal to each portfolio asset. The model is invested in a portfolio asset when the adjusted close price is greater than the moving average and the allocation is moved to cash when the adjusted close price is less than the moving average. The model also supports using moving average cross-over as the signal.

Momentum - Relative Strength

The relative strength momentum model invests in the best performing assets in the model based on each asset's past return. The momentum can be based on a single timing period, or multiple weighted timing periods. Additionally the model supports using moving averages as a risk control to decide whether investments should be moved to cash.

Momentum - Dual Momentum

The dual momentum model uses relative momentum to select the best performing model assets and incorporates absolute momentum as a filter to invest in cash if the excess return of the selected asset over cash is negative.

Adaptive Allocation

The adaptive asset allocation model combines relative strength momentum model with different asset weighting. The relative strength model uses an equal weight allocation for the model selected assets, whereas the adaptive asset allocation uses either risk parity allocation or minimum variance allocation for the model assets to minimize the expected volatility.

Target Volatility

The target volatility model adjusts the market exposure of the portfolio based on the realized historic volatility and the given volatility target. The cash allocation in the portfolio is increased or decreased as required to meet the targeted volatility level in order to improve the risk adjusted performance.
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Market Timing Results (Jan 2013 - Dec 2019) Save

Market timing results from 2013 to 2019 for iShares Edge MSCI Min Vol USA ETF (USMV) are based on 10 calendar month simple moving average. The timing portfolio is invested in the asset when the adjusted close price is greater than or equal to the moving average, otherwise the portfolio is invested in cash. Timing model trades are executed using the end of month close price each month based on the end of month signals.

Performance statistics for the timing portfolio and benchmark portfolios
PortfolioInitial BalanceFinal BalanceCAGRStdevBest YearWorst YearMax. DrawdownSharpe RatioSortino RatioUS Mkt Correlation
Timing Portfolio$10,000$23,51412.99%8.46%25.09%0.13%-7.56% 1.402.510.76
Buy & Hold Portfolio$10,000$26,11114.70%8.83%27.69%1.36%-7.56% 1.522.830.85
Vanguard 500 Index Investor$10,000$25,91214.57%11.11%32.18%-4.52%-13.55% 1.222.011.00
   
Notes on results:
  • Past performance is no guarantee of future results, which may vary. All use is subject to terms of service.
  • Investing involves risk, including possible loss of principal. The value of the investments and the income derived from them may fluctuate over time.
  • All portfolio returns presented are hypothetical and backtested. Hypothetical returns do not reflect trading costs, transaction fees, or taxes.
  • The backtested performance results are created by retroactively applying the specified investment strategy or methodology to historical data. Backtested models are developed with the benefit of hindsight but might not have foresight of the future.
  • The results are based on information from a variety of sources we consider reliable, but we do not represent that the information is accurate or complete.
  • The results do not constitute investment advice or recommendation, are provided solely for informational purposes, and are not an offer to buy or sell any securities.
  • The results are based on the total return of assets and assume that all received dividends and distributions are reinvested.
  • Out of market returns are based on 3-month treasury bill returns for cash or the selected alternative asset
  • The moving average signal is based on total return and accounts for splits and dividends
  • Monthly moving average period calculations are based on end-of-month samples
  • Additional trading costs and taxes for timing models are not reflected in the results
  • CAGR = Compound Annual Growth Rate
  • Stdev = Annualized standard deviation of monthly returns
  • Sharpe and Sortino ratios are calculated and annualized from monthly excess returns over the risk free rate (3-month treasury bill)
  • Stock market correlation is based on the correlation of monthly returns
  • Drawdowns are calculated based on monthly returns excluding cashflows
  • Refer to the FAQ section regarding the data sources and methodology descriptions
Annual returns for the timing portfolio and various benchmark portfolios
YearInflationReturnBalanceiShares Edge MSCI Min Vol USA ETF (USMV)Cash (CASHX)
Timing PortfolioBuy & Hold PortfolioVanguard 500 Index InvestorTiming PortfolioBuy & Hold PortfolioVanguard 500 Index Investor
20131.50%25.09%25.09%32.18%$12,509$12,509$13,21825.09%0.05%
20140.76%16.33%16.33%13.51%$14,551$14,551$15,00316.33%0.03%
20150.73%0.13%5.45%1.25%$14,569$15,344$15,1905.45%0.05%
20162.07%10.57%10.57%11.82%$16,109$16,966$16,98510.57%0.30%
20172.11%18.91%18.91%21.67%$19,156$20,175$20,66618.91%0.88%
20181.91%1.36%1.36%-4.52%$19,416$20,449$19,7311.36%1.90%
20192.29%21.10%27.69%31.33%$23,514$26,111$25,91227.69%2.13%
Monthly returns for the timing portfolio and various benchmark portfolios
YearMonthReturnBalanceiShares Edge MSCI Min Vol USA ETF (USMV)Cash (CASHX)
Timing PortfolioBuy & Hold PortfolioVanguard 500 Index InvestorTiming PortfolioBuy & Hold PortfolioVanguard 500 Index Investor
201314.99%4.99%5.18%$10,499$10,499$10,5184.99%0.00%
201322.76%2.76%1.34%$10,789$10,789$10,6582.76%0.01%
201334.96%4.96%3.74%$11,324$11,324$11,0574.96%0.01%
201342.78%2.78%1.91%$11,638$11,638$11,2682.78%0.01%
20135-2.35%-2.35%2.33%$11,365$11,365$11,530-2.35%0.00%
20136-0.42%-0.42%-1.35%$11,318$11,318$11,374-0.42%0.00%
201373.68%3.68%5.07%$11,735$11,735$11,9513.68%0.00%
20138-3.26%-3.26%-2.91%$11,353$11,353$11,603-3.26%0.00%
201392.54%2.54%3.12%$11,641$11,641$11,9662.54%0.00%
2013104.72%4.72%4.59%$12,191$12,191$12,5144.72%0.00%
2013111.32%1.32%3.03%$12,352$12,352$12,8931.32%0.00%
2013121.27%1.27%2.51%$12,509$12,509$13,2181.27%0.01%
20141-3.04%-3.04%-3.47%$12,128$12,128$12,759-3.04%0.01%
201424.39%4.39%4.56%$12,661$12,661$13,3414.39%0.00%
201430.85%0.85%0.82%$12,768$12,768$13,4510.85%0.00%
201441.33%1.33%0.72%$12,938$12,938$13,5481.33%0.00%
201451.15%1.15%2.33%$13,086$13,086$13,8651.15%0.00%
201461.24%1.24%2.05%$13,249$13,249$14,1491.24%0.00%
20147-1.42%-1.42%-1.39%$13,060$13,060$13,953-1.42%0.00%
201483.98%3.98%3.98%$13,580$13,580$14,5083.98%0.00%
20149-0.79%-0.79%-1.41%$13,473$13,473$14,303-0.79%0.00%
2014104.25%4.25%2.42%$14,045$14,045$14,6504.25%0.00%
2014113.56%3.56%2.68%$14,546$14,546$15,0433.56%0.00%
2014120.04%0.04%-0.26%$14,551$14,551$15,0030.04%0.00%
20151-0.49%-0.49%-3.02%$14,479$14,479$14,550-0.49%0.00%
201523.65%3.65%5.74%$15,008$15,008$15,3853.65%0.00%
20153-0.74%-0.74%-1.59%$14,896$14,896$15,140-0.74%0.00%
20154-0.58%-0.58%0.95%$14,810$14,810$15,284-0.58%0.00%
201551.02%1.02%1.27%$14,961$14,961$15,4781.02%0.00%
20156-2.23%-2.23%-1.93%$14,628$14,628$15,179-2.23%0.00%
201574.02%4.02%2.08%$15,216$15,216$15,4954.02%0.00%
20158-4.53%-4.53%-6.04%$14,526$14,526$14,559-4.53%0.01%
201590.01%-0.62%-2.49%$14,527$14,436$14,196-0.62%0.01%
2015100.00%5.99%8.42%$14,527$15,300$15,3925.99%0.00%
201511-0.21%-0.21%0.29%$14,496$15,267$15,436-0.21%0.01%
2015120.50%0.50%-1.59%$14,569$15,344$15,1900.50%0.02%
20161-1.39%-1.39%-4.98%$14,367$15,132$14,434-1.39%0.01%
201621.04%1.04%-0.15%$14,517$15,289$14,4131.04%0.03%
201635.93%5.93%6.78%$15,378$16,196$15,3905.93%0.03%
20164-0.36%-0.36%0.37%$15,322$16,137$15,447-0.36%0.02%
201651.58%1.58%1.78%$15,564$16,392$15,7231.58%0.02%
201664.49%4.49%0.25%$16,262$17,127$15,7624.49%0.03%
201671.47%1.47%3.68%$16,502$17,379$16,3421.47%0.02%
20168-1.96%-1.96%0.13%$16,178$17,038$16,363-1.96%0.02%
20169-0.64%-0.64%0.01%$16,074$16,928$16,364-0.64%0.03%
201610-2.75%-2.75%-1.83%$15,631$16,463$16,064-2.75%0.02%
2016110.61%0.61%3.70%$15,727$16,563$16,6580.61%0.03%
2016122.43%2.43%1.96%$16,109$16,966$16,9852.43%0.04%
201711.26%1.26%1.88%$16,313$17,180$17,3051.26%0.04%
201724.54%4.54%3.96%$17,053$17,961$17,9914.54%0.04%
201730.12%0.12%0.10%$17,075$17,983$18,0090.12%0.04%
201741.40%1.40%1.02%$17,314$18,235$18,1921.40%0.06%
201752.00%2.00%1.39%$17,661$18,601$18,4462.00%0.07%
20176-0.35%-0.35%0.61%$17,599$18,536$18,559-0.35%0.08%
201772.02%2.02%2.04%$17,956$18,911$18,9382.02%0.08%
201780.76%0.76%0.29%$18,092$19,055$18,9930.76%0.09%
201790.52%0.52%2.06%$18,186$19,153$19,3840.52%0.08%
2017101.95%1.95%2.32%$18,540$19,526$19,8341.95%0.09%
2017113.08%3.08%3.06%$19,111$20,127$20,4403.08%0.09%
2017120.24%0.24%1.10%$19,156$20,175$20,6660.24%0.10%
201813.49%3.49%5.71%$19,824$20,879$21,8463.49%0.11%
20182-4.25%-4.25%-3.69%$18,982$19,992$21,039-4.25%0.12%
20183-0.25%-0.25%-2.56%$18,934$19,941$20,502-0.25%0.14%
201840.21%0.21%0.37%$18,974$19,983$20,5780.21%0.14%
201851.00%1.00%2.39%$19,164$20,183$21,0711.00%0.15%
201861.70%1.70%0.61%$19,489$20,525$21,1981.70%0.16%
201873.29%3.29%3.71%$20,130$21,201$21,9853.29%0.16%
201883.06%3.06%3.25%$20,746$21,850$22,6983.06%0.17%
201891.25%1.25%0.55%$21,004$22,122$22,8241.25%0.17%
201810-4.05%-4.05%-6.85%$20,154$21,226$21,261-4.05%0.18%
2018113.23%3.23%2.03%$20,806$21,912$21,6923.23%0.19%
201812-6.68%-6.68%-9.04%$19,416$20,449$19,731-6.68%0.19%
201910.20%5.65%8.00%$19,455$21,604$21,3105.65%0.20%
201923.83%3.83%3.20%$20,200$22,432$21,9923.83%0.20%
201932.72%2.72%1.94%$20,749$23,041$22,4182.72%0.20%
201942.18%2.18%4.04%$21,201$23,542$23,3232.18%0.20%
20195-1.61%-1.61%-6.36%$20,858$23,162$21,839-1.61%0.20%
201964.98%4.98%7.03%$21,898$24,317$23,3754.98%0.19%
201971.67%1.67%1.43%$22,263$24,722$23,7081.67%0.17%
201981.59%1.59%-1.59%$22,618$25,116$23,3311.59%0.17%
201990.98%0.98%1.86%$22,841$25,364$23,7650.98%0.16%
201910-0.23%-0.23%2.15%$22,787$25,304$24,277-0.23%0.15%
2019111.39%1.39%3.62%$23,105$25,656$25,1561.39%0.13%
2019121.77%1.77%3.01%$23,514$26,111$25,9121.77%0.13%
Portfolio return and risk metrics
MetricTiming PortfolioBuy & Hold PortfolioVanguard 500 Index Investor
Arithmetic Mean (monthly)1.05%1.18%1.19%
Arithmetic Mean (annualized)13.39%15.13%15.26%
Geometric Mean (monthly)1.02%1.15%1.14%
Geometric Mean (annualized)12.99%14.70%14.57%
Volatility (monthly)2.44%2.55%3.21%
Volatility (annualized)8.46%8.83%11.11%
Downside Deviation (monthly)1.34%1.34%1.91%
Max. Drawdown-7.56%-7.56%-13.55%
US Market Correlation0.760.851.00
Beta(*)0.590.681.00
Alpha (annualized)4.23%4.39%0.00%
R259.58%74.24%100.00%
Sharpe Ratio1.401.521.22
Sortino Ratio2.512.832.01
Treynor Ratio (%)20.2019.6013.53
Calmar Ratio1.782.041.12
Active Return-1.58%0.13%N/A
Tracking Error7.07%5.69%N/A
Information Ratio-0.220.02N/A
Skewness-0.52-0.45-0.61
Excess Kurtosis0.470.311.07
Historical Value-at-Risk (5%)-3.85%-3.85%-5.78%
Analytical Value-at-Risk (5%)-2.97%-3.01%-4.09%
Conditional Value-at-Risk (5%)-4.88%-4.88%-7.07%
Upside Capture Ratio (%)72.7880.11100.00
Downside Capture Ratio (%)54.8155.76100.00
Safe Withdrawal Rate22.35%23.25%23.51%
Perpetual Withdrawal Rate10.06%11.40%11.30%
Positive Periods60 out of 84 (71.43%)59 out of 84 (70.24%)63 out of 84 (75.00%)
Gain/Loss Ratio1.191.350.85
* Vanguard 500 Index Investor is used as the benchmark for calculations. Value-at-risk metrics are based on monthly values.

Drawdowns for Timing Portfolio

Drawdowns for Timing Portfolio (worst 10)
RankStartEndLengthRecovery ByRecovery TimeUnderwater PeriodDrawdown
1Oct 2018Dec 20183 monthsApr 20194 months7 months-7.56%
2Aug 2015Jan 20166 monthsMar 20162 months8 months-5.57%
3Aug 2016Oct 20163 monthsFeb 20174 months7 months-5.27%
4Feb 2018Mar 20182 monthsJul 20184 months6 months-4.49%
5Aug 2013Aug 20131 monthOct 20132 months3 months-3.26%
6Jan 2014Jan 20141 monthFeb 20141 month2 months-3.04%
7May 2013Jun 20132 monthsJul 20131 month3 months-2.75%
8Mar 2015Jun 20154 monthsJul 20151 month5 months-2.53%
9May 2019May 20191 monthJun 20191 month2 months-1.61%
10Jul 2014Jul 20141 monthAug 20141 month2 months-1.42%
Worst 10 drawdowns included above

Drawdowns for Buy & Hold Portfolio

Drawdowns for Buy & Hold Portfolio (worst 10)
RankStartEndLengthRecovery ByRecovery TimeUnderwater PeriodDrawdown
1Oct 2018Dec 20183 monthsFeb 20192 months5 months-7.56%
2Aug 2016Oct 20163 monthsFeb 20174 months7 months-5.27%
3Aug 2015Sep 20152 monthsOct 20151 month3 months-5.12%
4Feb 2018Mar 20182 monthsJul 20184 months6 months-4.49%
5Aug 2013Aug 20131 monthOct 20132 months3 months-3.26%
6Jan 2014Jan 20141 monthFeb 20141 month2 months-3.04%
7May 2013Jun 20132 monthsJul 20131 month3 months-2.75%
8Mar 2015Jun 20154 monthsJul 20151 month5 months-2.53%
9May 2019May 20191 monthJun 20191 month2 months-1.61%
10Jul 2014Jul 20141 monthAug 20141 month2 months-1.42%
Worst 10 drawdowns included above

Drawdowns for Vanguard 500 Index Investor

Drawdowns for Vanguard 500 Index Investor (worst 10)
RankStartEndLengthRecovery ByRecovery TimeUnderwater PeriodDrawdown
1Oct 2018Dec 20183 monthsApr 20194 months7 months-13.55%
2Aug 2015Sep 20152 monthsMay 20168 months10 months-8.38%
3May 2019May 20191 monthJun 20191 month2 months-6.36%
4Feb 2018Mar 20182 monthsJul 20184 months6 months-6.16%
5Jan 2014Jan 20141 monthFeb 20141 month2 months-3.47%
6Dec 2014Jan 20152 monthsFeb 20151 month3 months-3.27%
7Aug 2013Aug 20131 monthSep 20131 month2 months-2.91%
8Jun 2015Jun 20151 monthJul 20151 month2 months-1.93%
9Oct 2016Oct 20161 monthNov 20161 month2 months-1.83%
10Mar 2015Mar 20151 monthMay 20152 months3 months-1.59%
Worst 10 drawdowns included above
Rolling returns summary
Roll PeriodTiming PortfolioBuy & Hold PortfolioVanguard 500 Index Investor
AverageHighLowAverageHighLowAverageHighLow
1 year13.35%25.09%0.13%15.06%27.69%1.36%15.32%32.18%-4.52%
3 years11.05%13.43%8.80%12.61%15.45%10.05%11.83%15.12%8.72%
5 years11.05%13.88%9.19%12.60%15.07%10.33%11.84%15.62%8.34%
7 years12.99%12.99%12.99%14.70%14.70%14.70%14.57%14.57%14.57%
Result statistics are based on annualized rolling returns over full calendar year periods
Timing periods and related holdings for the timing portfolio
#StartEndMonthsAssetsAsset PerformanceTiming PortfolioBuy & Hold PortfolioVanguard 500 Index Investor
1Jan 2013Aug 201532100.00% iShares Edge MSCI Min Vol USA ETF (USMV)USMV: 45.26%45.26%45.26%45.59%
2Sep 2015Oct 20152100.00% Cash (CASHX)CASHX: 0.01%0.01%5.33%5.72%
3Nov 2015Dec 201838100.00% iShares Edge MSCI Min Vol USA ETF (USMV)USMV: 33.65%33.65%33.65%28.19%
4Jan 2019Jan 20191100.00% Cash (CASHX)CASHX: 0.20%0.20%5.65%8.00%
5Feb 2019Dec 201911100.00% iShares Edge MSCI Min Vol USA ETF (USMV)USMV: 20.86%20.86%20.86%21.60%
6Jan 2020Jan 20201Please sign-in for forward signals----