The Best Defensive Strategies: Two Centuries of Evidence

Alpha Architect

Elisabetta Basilico

Research

9 Pages

The author examines downside protection—or defensive—strategies over more than 220 years of global financial history, covering many years in which traditional equity–bond portfolios suffer and across a wide range of economic scenarios and historical regimes. They find trend-following provides the most effective downside protection.

Key Takeaways

Deep history matters: Looking beyond post 1980 data changes which defensive tools appear most reliable.
Trend stands out: Trend following appears more dependable than many traditional hedges during extended drawdowns.
Common hedges disappoint: Gold and systematic put buying looked less effective once cost and consistency were considered.
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