From the information on your site, it appears that your timing dates are similar to that suggested by Brooke Thackray. From Brooke’s research on the DOW, you can beat a buy-and-hold strategy simply by buying on October 28 and selling on May 05.

Brooke’s web site is http://www.alphamountain.com

FJP

I was the person whose momentum and autmn abstinence strategy at http://www.Octoberstrategy.com, challenged those critics who dismissed my strategy as “market timing”.

Sweinson’s definition may be technichally correct, but it does not seem to be widely known. The term tends to be hurled at anyone who does anything other than buy something, and then hold it indefinitely, according to the “buy and hold” mantra of the mutual fund industry. So perhaps a I am a “market-timer”, albeit either a very good one, or a merely very lucky one, on an eight year lucky run, as some of your indexing commentators have alleged.

The idea of market timing is to control systematic risk. Rebalancing is one of the systematic way of decreasing some systematic risk. According to one of the examples by Professor Malkiel, rebalancing reduced volatility by 10% and enhanced returns by 1% annually over a ten year period.

Now I think about it, rebalancing does not reduce systematic risk enough, but the logic behind rebalancing is very strong. Systematic risk increases when equity prices increase and systematic risk decreases when equity prices decrease. Therefore, it makes logical sense to decrease equity exposure when equities are going up to maintain the same amount of systematic risk, while increase equity exposure when equities are going down to maintain the same amount of systematic risk. Initial asset allocation determines the initial exposure to systematic risk.

NN: Thank you for telling me about Robert Schiller’s research on P/E ratio.