Sunday, July 24, 2016

Leverage for the Long Run

wow. just wow.

Table 6: Unleveraged Buy and Hold versus Unleveraged Moving Average Timing(October 1928 – October 2015)
When the stock market is in an uptrend (above its Moving Average), conditions favor leverage as volatility declines and there are more positive streaks in performance. When the stock market is in a downtrend (below its Moving Average), the opposite is true as volatility tends to rise. 
We found that being exposed to equities with leverage in an uptrend and rotating into risk-free Treasury bills in a downtrend can lead to significant outperformance over time. For investors and traders seeking a destination with higher returns who are willing to take more risk at the right time, systematic leverage for the long run is one way of moving there, on average.