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Questions tagged [tactical-asset-allocation]

An active management portfolio strategy that rebalances the percentage of assets held in various categories in order to take advantage of market pricing anomalies or strong market sectors.

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Bonds in a zero interest rate environment

I've been looking at Pension Fund asset allocations. Why would they have any allocation to bonds in an zero interest rate environment? To make the point, let's assume the interest paid on these bonds ...
AlRacoon's user avatar
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1 vote
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Measure of hedge efficacy or other means to compare hedging strategies?

Is there a measure of hedge efficacy or another means to compare hedging strategies? I have seen Institutional Investors take very different approaches to tail hedging. On one extreme, I have seen ...
AlRacoon's user avatar
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3 votes
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"Better" forecasts lead to worse asset allocation performance

Short version If you're trying to produce an asset allocation system, it feels pretty natural to split it into an estimation component that forecasts asset means and covariance, and a weighting ...
FooBaz's user avatar
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2 votes
2 answers
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What are the quantitative requirements to distinguish between asset classes?

What are the quantitative criteria to distinguish between asset classes? I ask this as many institutional investors are undergoing strategic and tactical asset class decisions at the moment. How ...
AlRacoon's user avatar
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2 votes
1 answer
314 views

Fama French regression with dummy variable

I am looking to run Fama-French regression on a portfolio of stocks. I am looking to specify a regime using a dummy variable. This dummy variable could be a low volatility/ high volatility marker. ...
shoonya's user avatar
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1 vote
0 answers
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Selecting the best characteristic portfolio per rebalance date

An investor typically decides a portfolio objective and sticks with that objective for every rebalance date in the portfolio's life. Common characteristic portfolios that the investor chooses are: ...
develarist's user avatar
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2 votes
1 answer
102 views

Trading Ranges for Tactical Asset Allocation

Do methods exist to determine trading ranges around benchmark weights/strategic asset allocation weights for a tactical asset allocation from the correlation structure between the individual asset ...
Hans-Peter Schrei's user avatar
1 vote
0 answers
57 views

Crisis in in-sample period

I am backtesting a value momentum asset allocation strategy and my in sample period is from 2003 to 2011 and out sample from 2012 to 2019. I am optimising a cutoff for value on in sample to allocate ...
Dhruv Mahajan's user avatar
0 votes
1 answer
81 views

Country allocation -optimization 3 countries

I have the following problem: an equity portfolio allocated to 3 countries. Each country has an independent indicator (signal) which takes values from -4 to 4. The allocation for each country at ...
E.B.'s user avatar
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1 vote
0 answers
521 views

Problems with Black-Litterman: negative portfolio weights, and very poor returns

I am trying to implement the Black-Litterman model using own-defined views matrix (from consensus analysts). However, I have encountered the problems of negative portfolio weights in some periods, and ...
Mataunited17's user avatar
3 votes
1 answer
204 views

Optimal portfolio construction for tactical asset allocation

This is the first time I post question here so if there is anything that does not follow the rule, please bear with me and let me know. I am trying to solve this optimization question but I don't ...
Tho's user avatar
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4 votes
0 answers
135 views

difference between Meucci fully flexible probability and markov regime swtiching models?

What is the difference between A. Meucci's Fully Flexible Probability (FFP) and Markov Regime Switching Models ? They seem very similar to me, FFP based on state variables that define regimes will ...
annkepan's user avatar
21 votes
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Questions on Kelly criterion

I am new to asset allocation problems and have some concerns regarding the derivation of the continuous-time Kelly criterion (i.e. not the original version destined to discrete sports betting/Casino). ...
user22568's user avatar
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0 answers
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backtest asset allocation strategies

I've searched the site but haven't found an easy way to backtest my personal portfolio allocations. Suppose I want to know the total return for the following portfolio from Jan 1, 2009 to Dec 31, 2014:...
Stephen Grimes's user avatar
7 votes
3 answers
690 views

What is smart beta, alternative index, factor investing?

What is smart beta, alternative index, factor investing? Are they basically the same thing? Construct a benchmark index using schema other than market cap?
JOHN's user avatar
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2 votes
0 answers
75 views

Subclass Tracking Error

I am currently doing a master program project regarding tracking errors. My assignment is to evaluate following question: How to find out the correlation structure of the passive (=second order/sub-...
tr_ad's user avatar
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1 vote
0 answers
359 views

Asset allocation and GARCH models

I am trying to solve an asset allocation problem and I am having some troubles grasping the concept. I am working with excess returns on 4 stock indices and I am obtaining the excess returns forecasts ...
Masher's user avatar
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1 answer
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Transaction Costs Measure ATOP: What does it mean and exactly measure?

I went through some presentations about LowVol strategies for some indices. In the presentations were tables with average returns, vola, Sharp ratio and ATOP. I have no clue what this ATOP is supposed ...
Finance_Newbie's user avatar
3 votes
0 answers
160 views

Quantitative method to select tactical bands for asset allocation

Do you know a study with a methodology for selecting tactical bands (or the allowed deviation from a strategic asset allocation)? Thanks
Victor's user avatar
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7 votes
2 answers
924 views

how to choose top n assets?

I have m assets, and have estimated their future returns and covariance matrix. I would like to invest in an evenly weighted n product basket from this universe, where 0<n<m. How do i find the ...
user847663's user avatar
2 votes
2 answers
863 views

performance attribution

I am trying to do some performance attribution for a few portfolios we manage. What I am trying to examine are three different sources of returns: The general asset allocation Security Selection The ...
Avi's user avatar
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4 votes
3 answers
3k views

What are some of the major quantitative approaches to tactical asset allocation?

Note: This question was written for the weekly topic challenge. Many of you who deal with asset allocation will probably already be familiar with Mebane Faber's Timing Model, based on one of SSRN's ...
Tal Fishman's user avatar
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6 votes
2 answers
286 views

How do earnings estimates respond to changes in underlying fundamentals and economic conditions?

Sell-side analysts' earnings estimates for individual companies, typically reported by I/B/E/S, are a key ingredient to many quantitative models. However, revisions to analyst estimates tend to lag ...
Tal Fishman's user avatar
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8 votes
2 answers
787 views

How to shift amongst asset classes in response to relative value views?

I am designing an asset allocation strategy/fund which invests in four asset classes (via four independent sub-funds): Domestic equity International equity Domestic fixed income Foreign currencies ...
Tal Fishman's user avatar
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9 votes
1 answer
455 views

Which valuation measures are most useful for equity market timing?

Competing academic studies, such as Asness's Fight the Fed Model and Lee, Myers, and Swaminathan's What is the Intrinsic Value of the Dow, offer differing answers to the question of whether equity ...
Tal Fishman's user avatar
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8 votes
2 answers
787 views

Should I use currency hedged or unhedged returns for a global equity allocation model?

I am building a global tactical equity allocation model. The model will help determine an optimal allocation amongst a number of major developed and emerging stock markets (represented for my purposes ...
Tal Fishman's user avatar
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