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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Timing Periods
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Time Period #1
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Time Period #2
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Time Period #3
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Time Period #4
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Time Period #5
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Volatility Period
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Asset 1
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Asset 2
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Asset 3
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Asset 4
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Asset 5
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Asset 6
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Asset 7
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Asset 8
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Asset 9
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Asset 10
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Market Timing Results (Jan 2006 - Dec 2016)

Market timing results from 2006 to 2016 are based on relative strength model holding the best performing asset. The model uses a single performance window of 5 calendar month(s). Risk control based on 6 calendar month moving average is used to keep assets in cash if their price is below the moving average. Timing model trades are executed using the end of month close price each month based on the end of month signals. The time period was constrained by the available data for Vanguard FTSE Europe ETF (VGK) [Apr 2005 - Aug 2019].

Performance statistics for the timing portfolio and benchmark portfolios
PortfolioInitial BalanceFinal BalanceCAGRStdevBest YearWorst YearMax. DrawdownSharpe RatioSortino RatioUS Mkt Correlation
Timing Portfolio$10,000$18,8365.93%11.82%39.61%-9.16%-22.04% 0.460.780.41
Vanguard FTSE Europe ETF$10,000$14,0693.15%20.27%33.06%-44.71%-59.77% 0.210.290.89
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Notes on results:
  • Past performance is not a guarantee of future returns. See Disclaimer and Terms of Use
  • The selected portfolio allocation for comparison assumes monthly rebalancing
  • An equal-weight allocation is used for the assets held by the momentum model
  • The results for the timing portfolio assume monthly rebalancing trades
  • The relative strength signal is based on total return including dividends
  • The moving average signal is based on total return and accounts for splits and dividends
  • 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 (1-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 regarding the list of data sources and methodology for additional details
Annual returns for the timing portfolio and various benchmark portfolios
YearInflationReturnBalanceVanguard FTSE Europe ETF (VGK)Cash (CASHX)
Timing PortfolioVanguard FTSE Europe ETFTiming PortfolioVanguard FTSE Europe ETF
20062.54%33.06%33.06%$13,306$13,30633.06%4.81%
20074.08%8.02%13.24%$14,374$15,06813.24%4.67%
20080.09%1.59%-44.71%$14,602$8,331-44.71%1.59%
20092.72%39.61%31.33%$20,386$10,94131.33%0.09%
20101.50%-9.16%6.05%$18,519$11,6026.05%0.10%
20112.96%4.04%-11.64%$19,267$10,251-11.64%0.04%
20121.74%-6.56%21.57%$18,004$12,46321.57%0.06%
20131.50%15.56%24.38%$20,806$15,50124.38%0.00%
20140.76%0.65%-7.10%$20,941$14,400-7.10%0.00%
20150.73%-8.26%-1.94%$19,210$14,120-1.94%0.01%
20162.07%-1.95%-0.37%$18,836$14,069-0.37%0.21%
Monthly returns for the timing portfolio and various benchmark portfolios
YearMonthReturnBalanceVanguard FTSE Europe ETF (VGK)Cash (CASHX)
Timing PortfolioVanguard FTSE Europe ETFTiming PortfolioVanguard FTSE Europe ETF
200616.33%6.33%$10,633$10,6336.33%0.35%
20062-0.32%-0.32%$10,599$10,599-0.32%0.34%
200634.02%4.02%$11,025$11,0254.02%0.37%
200645.23%5.23%$11,601$11,6015.23%0.36%
20065-2.93%-2.93%$11,260$11,260-2.93%0.43%
200661.01%1.01%$11,375$11,3751.01%0.40%
200671.04%1.04%$11,492$11,4921.04%0.40%
200683.24%3.24%$11,865$11,8653.24%0.42%
200691.12%1.12%$11,998$11,9981.12%0.41%
2006103.69%3.69%$12,441$12,4413.69%0.41%
2006113.76%3.76%$12,909$12,9093.76%0.42%
2006123.08%3.08%$13,306$13,3063.08%0.40%
200711.57%1.57%$13,515$13,5151.57%0.44%
20072-1.24%-1.24%$13,347$13,347-1.24%0.38%
200733.73%3.73%$13,845$13,8453.73%0.43%
200745.75%5.75%$14,641$14,6415.75%0.44%
200752.13%2.13%$14,954$14,9542.13%0.41%
20076-0.35%-0.35%$14,901$14,901-0.35%0.40%
20077-2.84%-2.84%$14,477$14,477-2.84%0.40%
200780.27%0.27%$14,516$14,5160.27%0.42%
200790.32%5.16%$14,563$15,2665.16%0.32%
2007104.74%4.74%$15,254$15,9904.74%0.32%
200711-3.76%-3.76%$14,680$15,389-3.76%0.34%
200712-2.09%-2.09%$14,374$15,068-2.09%0.27%
200810.21%-8.98%$14,404$13,714-8.98%0.21%
200820.13%-0.29%$14,423$13,674-0.29%0.13%
200830.17%1.31%$14,447$13,8531.31%0.17%
200840.18%4.10%$14,473$14,4214.10%0.18%
200850.18%0.67%$14,499$14,5180.67%0.18%
200860.17%-8.99%$14,524$13,213-8.99%0.17%
200870.15%-2.88%$14,546$12,832-2.88%0.15%
200880.13%-3.84%$14,564$12,339-3.84%0.13%
200890.15%-12.89%$14,586$10,748-12.89%0.15%
2008100.08%-21.83%$14,598$8,402-21.83%0.08%
2008110.03%-7.38%$14,602$7,782-7.38%0.03%
2008120.00%7.06%$14,602$8,3317.06%0.00%
200910.00%-13.84%$14,602$7,177-13.84%0.00%
200920.01%-10.38%$14,604$6,433-10.38%0.01%
200930.02%7.70%$14,607$6,9287.70%0.02%
200940.01%13.17%$14,608$7,84013.17%0.01%
2009514.27%14.27%$16,692$8,95814.27%0.00%
20096-2.35%-2.35%$16,300$8,748-2.35%0.01%
2009711.35%11.35%$18,149$9,74011.35%0.01%
200985.48%5.48%$19,144$10,2745.48%0.01%
200994.82%4.82%$20,067$10,7694.82%0.01%
200910-2.58%-2.58%$19,549$10,492-2.58%0.00%
2009114.53%4.53%$20,435$10,9674.53%0.00%
200912-0.24%-0.24%$20,386$10,941-0.24%0.01%
20101-6.27%-6.27%$19,107$10,254-6.27%0.00%
201020.00%-0.55%$19,107$10,198-0.55%0.00%
201030.01%6.51%$19,109$10,8626.51%0.01%
20104-3.80%-3.80%$18,383$10,449-3.80%0.01%
201050.01%-11.75%$18,385$9,221-11.75%0.01%
201060.01%-1.64%$18,386$9,070-1.64%0.01%
201070.01%14.18%$18,388$10,35614.18%0.01%
20108-4.58%-4.58%$17,547$9,882-4.58%0.01%
201090.01%11.26%$17,548$10,99511.26%0.01%
2010104.89%4.89%$18,406$11,5324.89%0.01%
201011-7.81%-7.81%$16,969$10,631-7.81%0.01%
2010129.13%9.13%$18,519$11,6029.13%0.01%
201113.69%3.69%$19,201$12,0303.69%0.01%
201123.12%3.12%$19,801$12,4063.12%0.01%
20113-1.03%-1.03%$19,597$12,278-1.03%0.01%
201148.32%8.32%$21,227$13,2998.32%0.00%
20115-2.84%-2.84%$20,623$12,921-2.84%0.00%
20116-2.09%-2.09%$20,193$12,652-2.09%0.00%
20117-4.60%-4.60%$19,265$12,070-4.60%0.00%
201180.01%-9.28%$19,267$10,950-9.28%0.01%
201190.00%-12.24%$19,267$9,610-12.24%0.00%
2011100.00%12.42%$19,267$10,80412.42%0.00%
2011110.00%-2.87%$19,267$10,494-2.87%0.00%
2011120.00%-2.31%$19,267$10,251-2.31%0.00%
201210.00%5.45%$19,267$10,8115.45%0.00%
201220.00%5.42%$19,267$11,3975.42%0.00%
201230.07%0.07%$19,280$11,4050.07%0.00%
20124-2.50%-2.50%$18,799$11,120-2.50%0.00%
20125-11.97%-11.97%$16,548$9,789-11.97%0.01%
201260.00%8.27%$16,548$10,5988.27%0.00%
201270.00%0.33%$16,548$10,6330.33%0.00%
201280.01%4.68%$16,550$11,1304.68%0.01%
201290.01%2.94%$16,552$11,4582.94%0.01%
2012101.77%1.77%$16,844$11,6601.77%0.01%
2012112.48%2.48%$17,261$11,9492.48%0.01%
2012124.30%4.30%$18,004$12,4634.30%0.01%
201314.28%4.28%$18,774$12,9964.28%0.00%
20132-3.40%-3.40%$18,136$12,555-3.40%0.00%
201330.33%0.33%$18,197$12,5970.33%0.00%
201344.54%4.54%$19,023$13,1684.54%0.00%
201350.02%0.02%$19,027$13,1710.02%0.00%
20136-4.42%-4.42%$18,185$12,588-4.42%0.00%
201370.00%7.63%$18,185$13,5487.63%0.00%
20138-1.47%-1.47%$17,918$13,349-1.47%0.00%
201397.18%7.18%$19,204$14,3077.18%0.00%
2013104.18%4.18%$20,008$14,9064.18%0.00%
2013111.02%1.02%$20,212$15,0581.02%0.00%
2013122.94%2.94%$20,806$15,5012.94%0.00%
20141-4.57%-4.57%$19,854$14,792-4.57%0.00%
201427.34%7.34%$21,312$15,8787.34%0.00%
20143-0.65%-0.65%$21,174$15,775-0.65%0.00%
201442.65%2.65%$21,734$16,1922.65%0.00%
201450.78%0.78%$21,903$16,3180.78%0.00%
20146-0.08%-0.08%$21,886$16,306-0.08%0.00%
20147-4.32%-4.32%$20,941$15,601-4.32%0.00%
201480.00%0.73%$20,941$15,7150.73%0.00%
201490.00%-3.98%$20,941$15,090-3.98%0.00%
2014100.00%-1.90%$20,941$14,803-1.90%0.00%
2014110.00%2.07%$20,941$15,1102.07%0.00%
2014120.00%-4.69%$20,941$14,400-4.69%0.00%
201510.00%0.52%$20,941$14,4750.52%0.00%
201520.00%6.09%$20,941$15,3576.09%0.00%
20153-2.43%-2.43%$20,431$14,983-2.43%0.00%
201544.24%4.24%$21,298$15,6184.24%0.00%
201550.28%0.28%$21,358$15,6630.28%0.00%
20156-3.28%-3.28%$20,658$15,149-3.28%0.00%
201570.00%2.67%$20,658$15,5542.67%0.00%
20158-7.02%-7.02%$19,208$14,462-7.02%0.00%
201590.00%-4.12%$19,208$13,866-4.12%0.00%
2015100.00%5.90%$19,208$14,6835.90%0.00%
2015110.00%-1.25%$19,208$14,500-1.25%0.00%
2015120.01%-2.62%$19,210$14,120-2.62%0.01%
201610.01%-5.55%$19,212$13,336-5.55%0.01%
201620.02%-3.23%$19,216$12,906-3.23%0.02%
201630.02%7.03%$19,220$13,8147.03%0.02%
201640.01%2.76%$19,222$14,1952.76%0.01%
201650.01%-0.50%$19,224$14,124-0.50%0.01%
201660.02%-4.04%$19,227$13,553-4.04%0.02%
201670.02%3.47%$19,231$14,0243.47%0.02%
201680.68%0.68%$19,363$14,1200.68%0.02%
201690.80%0.80%$19,518$14,2330.80%0.02%
201610-3.53%-3.53%$18,829$13,730-3.53%0.02%
2016110.01%-2.34%$18,831$13,409-2.34%0.01%
2016120.03%4.92%$18,836$14,0694.92%0.03%
Portfolio return and risk metrics
MetricTiming PortfolioVanguard FTSE Europe ETF
Arithmetic Mean (monthly)0.54%0.43%
Arithmetic Mean (annualized)6.65%5.31%
Geometric Mean (monthly)0.48%0.26%
Geometric Mean (annualized)5.93%3.15%
Volatility (monthly)3.41%5.85%
Volatility (annualized)11.82%20.27%
Downside Deviation (monthly)1.99%4.10%
Max. Drawdown-22.04%-59.77%
US Market Correlation0.410.89
Beta(*)0.341.00
Alpha (annualized)4.69%-0.00%
R234.10%100.00%
Sharpe Ratio0.460.21
Sortino Ratio0.780.29
Treynor Ratio (%)15.924.15
Calmar Ratio-0.23-0.15
Active Return2.77%N/A
Tracking Error16.46%N/A
Information Ratio0.17N/A
Skewness0.47-0.46
Excess Kurtosis3.331.27
Historical Value-at-Risk (5%)-4.58%-10.86%
Analytical Value-at-Risk (5%)-5.08%-9.19%
Conditional Value-at-Risk (5%)-7.04%-14.09%
Upside Capture Ratio (%)49.42100.00
Downside Capture Ratio (%)39.79100.00
Safe Withdrawal Rate14.20%9.91%
Perpetual Withdrawal Rate3.82%1.24%
Positive Periods78 out of 132 (59.09%)73 out of 132 (55.30%)
Gain/Loss Ratio0.680.98
* Vanguard FTSE Europe ETF is used as the benchmark for calculations. Value-at-risk metrics are based on monthly values.

Drawdowns for Historical Market Stress Periods

Drawdowns for Historical Market Stress Periods
Stress PeriodStartEndTiming PortfolioVanguard FTSE Europe ETF
Subprime CrisisNov 2007Mar 2009-5.77%-59.77%

Drawdowns for Timing Portfolio

Drawdowns for Timing Portfolio (worst 10)
RankStartEndLengthRecovery ByRecovery TimeUnderwater PeriodDrawdown
1May 2011May 20121 year 1 monthFeb 20141 year 9 months2 years 10 months-22.04%
2Dec 2009Nov 20101 yearApr 20115 months1 year 5 months-16.96%
3Jun 2014Oct 20162 years 5 months-14.04%
4Nov 2007Dec 20072 monthsMay 20091 year 5 months1 year 7 months-5.77%
5Jun 2007Jul 20072 monthsOct 20073 months5 months-3.19%
6May 2006May 20061 monthAug 20063 months4 months-2.93%
7Oct 2009Oct 20091 monthNov 20091 month2 months-2.58%
8Jun 2009Jun 20091 monthJul 20091 month2 months-2.35%
9Feb 2007Feb 20071 monthMar 20071 month2 months-1.24%
10Mar 2014Mar 20141 monthApr 20141 month2 months-0.65%
Worst 10 drawdowns included above

Drawdowns for Vanguard FTSE Europe ETF

Drawdowns for Vanguard FTSE Europe ETF
RankStartEndLengthRecovery ByRecovery TimeUnderwater PeriodDrawdown
1Nov 2007Feb 20091 year 4 monthsApr 20145 years 2 months6 years 6 months-59.77%
2Jun 2014Feb 20161 year 9 months-20.91%
3Jun 2007Jul 20072 monthsSep 20072 months4 months-3.19%
4May 2006May 20061 monthAug 20063 months4 months-2.93%
5Feb 2007Feb 20071 monthMar 20071 month2 months-1.24%
6Feb 2006Feb 20061 monthMar 20061 month2 months-0.32%
Rolling returns summary
Roll PeriodTiming PortfolioVanguard FTSE Europe ETF
AverageHighLowAverageHighLow
1 year6.96%39.61%-9.16%5.81%33.06%-44.71%
3 years5.43%15.28%-4.06%1.58%11.99%-8.34%
5 years4.80%13.12%-0.45%3.37%13.22%-5.08%
7 years4.75%8.76%-1.12%3.25%7.83%-0.64%
10 years5.14%6.75%3.54%2.03%3.51%0.56%
Result statistics are based on annualized rolling returns over full calendar year periods
Timing periods and related holdings for the timing portfolio
#StartEndMonthsAssetsAsset PerformanceTiming PortfolioVanguard FTSE Europe ETF
1Jan 2006Aug 200720100.00% Vanguard FTSE Europe ETF (VGK)VGK: 45.16%45.16%45.16%
2Sep 2007Sep 20071100.00% Cash (CASHX)CASHX: 0.32%0.32%5.16%
3Oct 2007Dec 20073100.00% Vanguard FTSE Europe ETF (VGK)VGK: -1.30%-1.30%-1.30%
4Jan 2008Apr 200916100.00% Cash (CASHX)CASHX: 1.63%1.63%-47.97%
5May 2009Jan 20109100.00% Vanguard FTSE Europe ETF (VGK)VGK: 30.80%30.80%30.80%
6Feb 2010Mar 20102100.00% Cash (CASHX)CASHX: 0.01%0.01%5.92%
7Apr 2010Apr 20101100.00% Vanguard FTSE Europe ETF (VGK)VGK: -3.80%-3.80%-3.80%
8May 2010Jul 20103100.00% Cash (CASHX)CASHX: 0.03%0.03%-0.89%
9Aug 2010Aug 20101100.00% Vanguard FTSE Europe ETF (VGK)VGK: -4.58%-4.58%-4.58%
10Sep 2010Sep 20101100.00% Cash (CASHX)CASHX: 0.01%0.01%11.26%
11Oct 2010Jul 201110100.00% Vanguard FTSE Europe ETF (VGK)VGK: 9.78%9.78%9.78%
12Aug 2011Feb 20127100.00% Cash (CASHX)CASHX: 0.01%0.01%-5.58%
13Mar 2012May 20123100.00% Vanguard FTSE Europe ETF (VGK)VGK: -14.11%-14.11%-14.11%
14Jun 2012Sep 20124100.00% Cash (CASHX)CASHX: 0.02%0.02%17.05%
15Oct 2012Jun 20139100.00% Vanguard FTSE Europe ETF (VGK)VGK: 9.87%9.87%9.87%
16Jul 2013Jul 20131100.00% Cash (CASHX)CASHX: 0.00%0.00%7.63%
17Aug 2013Jul 201412100.00% Vanguard FTSE Europe ETF (VGK)VGK: 15.15%15.15%15.15%
18Aug 2014Feb 20157100.00% Cash (CASHX)CASHX: 0.00%0.00%-1.57%
19Mar 2015Jun 20154100.00% Vanguard FTSE Europe ETF (VGK)VGK: -1.35%-1.35%-1.35%
20Jul 2015Jul 20151100.00% Cash (CASHX)CASHX: 0.00%0.00%2.67%
21Aug 2015Aug 20151100.00% Vanguard FTSE Europe ETF (VGK)VGK: -7.02%-7.02%-7.02%
22Sep 2015Jul 201611100.00% Cash (CASHX)CASHX: 0.12%0.12%-3.03%
23Aug 2016Oct 20163100.00% Vanguard FTSE Europe ETF (VGK)VGK: -2.09%-2.09%-2.09%
24Nov 2016Dec 20162100.00% Cash (CASHX)CASHX: 0.04%0.04%2.46%
25Jan 2017Jan 20171100.00% Vanguard FTSE Europe ETF (VGK)---