Jason Wenk

How Impossible Is Market Timing?

To reduce "whipsaws" add a few asset classes to your excel model and add additional buy/sell rules. As an example, use 10 asset classes each with a timing method (200MA; 40/200MA crossover; etc.) and also rank the performance of each asset class over various periods. This can be done by adding a column to your spreadsheet of historical data that computates the sum of 3, 6, and 12 month returns, for example. You could use a simple RSI calculation as well. Only buy the top 5 (or 4, 6, 8 - you'll see what happens as you test) asset classes. When this is done you can actually see increased returns and reduced volatility to the simple model created by Mebane.

Also, for those who question the validity of Mebane's research and don't refer to it as true "quant" - I too think you're missing the point. I believe his primary purpose in this article is to urge readers that buy and hold may work over very long time periods, but will cause significant drawdown in bear markets. I would think he publishes this for free to make a point but has additional tools for his practice that are more refined.