Reducing sequence risk using trend following investment strategies and the CAPE

Andrew Clare; James Seaton; Peter Nigel Smith; Stephen Thomas

Reducing sequence risk using trend following investment strategies and the CAPE

Andrew Clare, James Seaton, Peter Nigel Smith, Stephen Thomas

Economics

Research output: Working paper › Discussion paper

Abstract

Sequence risk is a poorly understood, but crucial aspect of the risk faced by many investors. Using US equity data from 1872-2015 we apply the concept of Perfect Withdrawal Rates to show how this risk can be significantly reduced by applying simple, trend following investment strategies. We also show that knowing the CAPE ratio at the beginning of a decumulation period is useful for predicting and enhancing the sustainable withdrawal rate.

Original language	English
Publication status	Published - Sept 2016

Publication series

Name	Department of Economics Discussion Papers in Economics
No.	16/11

Keywords

Sequence Risk; Perfect Withdrawal Rate; Decumulation; Trend-Following; CAPE

Cite this

@techreport{547a8c45264746c8951c85f86d8d2faf,

title = "Reducing sequence risk using trend following investment strategies and the CAPE",

abstract = "Sequence risk is a poorly understood, but crucial aspect of the risk faced by many investors. Using US equity data from 1872-2015 we apply the concept of Perfect Withdrawal Rates to show how this risk can be significantly reduced by applying simple, trend following investment strategies. We also show that knowing the CAPE ratio at the beginning of a decumulation period is useful for predicting and enhancing the sustainable withdrawal rate.",

keywords = "Sequence Risk; Perfect Withdrawal Rate; Decumulation; Trend-Following; CAPE",

author = "Andrew Clare and James Seaton and Smith, {Peter Nigel} and Stephen Thomas",

year = "2016",

month = sep,

language = "English",

series = "Department of Economics Discussion Papers in Economics",

number = "16/11",

type = "WorkingPaper",

}

TY - UNPB

T1 - Reducing sequence risk using trend following investment strategies and the CAPE

AU - Clare, Andrew

AU - Seaton, James

AU - Smith, Peter Nigel

AU - Thomas, Stephen

PY - 2016/9

Y1 - 2016/9

N2 - Sequence risk is a poorly understood, but crucial aspect of the risk faced by many investors. Using US equity data from 1872-2015 we apply the concept of Perfect Withdrawal Rates to show how this risk can be significantly reduced by applying simple, trend following investment strategies. We also show that knowing the CAPE ratio at the beginning of a decumulation period is useful for predicting and enhancing the sustainable withdrawal rate.

AB - Sequence risk is a poorly understood, but crucial aspect of the risk faced by many investors. Using US equity data from 1872-2015 we apply the concept of Perfect Withdrawal Rates to show how this risk can be significantly reduced by applying simple, trend following investment strategies. We also show that knowing the CAPE ratio at the beginning of a decumulation period is useful for predicting and enhancing the sustainable withdrawal rate.

KW - Sequence Risk; Perfect Withdrawal Rate; Decumulation; Trend-Following; CAPE

M3 - Discussion paper

T3 - Department of Economics Discussion Papers in Economics

BT - Reducing sequence risk using trend following investment strategies and the CAPE

ER -