A Trader Journal

I came across an interesting paper that describes a simple but effective quantitative system that outperformed S&P 500 for several decades with lower draw downs then buy and hold. The system was originally published in 2006 and then updated in 2009.

The system is basically a long term mechanical system using monthly charts for timing the markets with tactical asset allocation. The annual returns average is 11% since 1973. The max draw down is below 10% and volatility is below 7%. End of the post has couple system equity curve charts from the paper.

The system is basically a simple moving average timing model tested since 1900 on US Equity market and from 1973 on other diverse and publicly traded asset class indices including MSCI EAFE, GSCI, NAREIT and 10-year treasury bonds. Then the paper examines the system with a tactical asset allocation framework.

What picked my interest is its market out performance with low draw down and low volatility. Also period from 1973-2009 includes dot com crash, housing crash and few other crashes. Another factor I liked about the paper is it has lots of test results since 1900 for readers without rocket science math equations to describe the system. You can get the paper (~40 pages) from SSRN website for free.
Link : A Quantitative approach to tactical asset allocation

I am curious to hear your thoughts/ideas on what ways one can improve the system further.  The area of improvement can be anything i.e., entries, exits, asset selection or position sizing etc.