Momentum Investing and the Asset Allocation Decision

Abstract:     
This study examines the active asset allocation decisions of Australian multi-sector fund managers to determine whether active fund managers engage in momentum strategies. We find evidence supporting the existence of momentum investing in active asset allocation strategies. This evidence exists in the Australian Equities, Australian Fixed Interest and Listed Property asset classes. Interestingly, balanced funds adopt contrarian strategies in the International Equities asset class. We also examine whether there is any association between a fund's market timing skill and the execution of momentum strategies. Our results show that fund managers with no market timing skill are momentum investors.

Keywords: Tactical asset allocation, momentum

JEL Classifications: G23

Working Paper Series