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Contribution Details
| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | How Good Is Tactical Asset Allocation Using Standard Indicators? |
| Organization Unit | |
| Authors |
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| Item Subtype | Original Work |
| Refereed | No |
| Status | Published in final form |
| Language |
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| Journal Title | The Journal of Portfolio Management |
| Publisher | Pageant Media |
| Geographical Reach | international |
| ISSN | 0095-4918 |
| Volume | 46 |
| Number | 6 |
| Page Range | 120 - 134 |
| Date | 2020 |
| Abstract Text | Tactical asset allocation decisions are often based on (and justified by) macroeconomic developments and valuation ratios. However, why should using such publicly available information provide an investment edge? This article investigates whether a simple combination approach based on popular indicators can improve a multi-asset portfolio’s performance. The author developed a method to assess each asset class’s attractiveness using standard and economically motivated indicators from four scientifically valid areas (valuation, trend, risk, and macroeconomics). Each indicator was evaluated relative to its own history, assigned a percentile score, and over- or underweights per asset class were determined based on the combined, equal-weighted score. This intuitive method generated high information ratios and a significant outperformance for a portfolio invested in stocks and bonds in the United States, the United Kingdom, the Eurozone, and Japan. The results held up in various robustness checks and were stronger for riskier assets. The individual indicators as well as the resulting scores can be presented in a dashboard. |
| Digital Object Identifier | 10.3905/jpm.2020.1.145 |
| Other Identification Number | merlin-id:20675 |
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| Keywords | Portfolio management/multi-asset allocation, portfolio theory, portfolio construction |