Inclusion Criteria:

1. Female
2. Post menopausal
3. Age at least 60 years
4. Eight or more years of education with a history of premorbid literacy
5. By history, fluent speaker of English
6. Dementia (DSM-IV-derived criteria) present for at least six months beginning at age 60 or older
7. Mild or moderate dementia, defined by MMSE score between 12 and 26, inclusive
8. NINCDS-ADRDA criteria for probable AD based on results of a neurologist#s evaluation and laboratory tests
9. Neurological history and examination within normal limits for age, except for changes consistent with AD or age
10. Modified Ischemia Scale score of 4 or less
11. Good physical health established by medical history, physical exam, and baseline laboratory tests
12. Blood pressure < 180/100 at time of entry
13. No history of, or examination evidence for, current insulin-dependent diabetes, stroke thought to impair cognition (e.g., cortical or thalamic infarct), or other focal brain lesion or neurological disorder likely to affect cognition, or other serious medical illness likely to limit participant's ability to complete study protocol
14. No history of pulmonary embolism, deep vein thrombosis, or retinal vein occlusion
15. No DSM-IV criteria for Major Depressive Episode or other Axis I psychiatric disorder, other than AD, within the past year
16. Effective dose of an FDA-approved cholinesterase inhibitor for at least 6 months prior to randomization (usually donepezil 5 or 10 mg/d, rivastigmine 6 to 12 mg/d, or galantamine 16 to 24 mg/d); stable effective dose for at least 2 months prior to randomization
17. No psychotropic medication within 4 weeks of study entry or stable dose (for at least 4 weeks month) of psychotropic medications
18. No experimental mediation for the treatment of cognitive impairment associated with dementia within 2 months of study entry
19. No raloxifene within 6 months of study entry
20. No systemic estrogen, progestin, testosterone, related gonadal hormone therapy within 2 months of study entry
21. No other known contraindication to raloxifene or donepezil
22. A primary caregiver who knows the participant well and who is able to accompany her for regular assessments during the course of the study
23. Assent or consent of participant plus informed consent from participant's next of kin or legally authorized representative

Exclusion Criteria:

1. Failure to meet inclusion criteria