A Quantitative Approach to Tactical Asset Allocation
Mebane T. Faber
Cambria Investment Management
February 17, 2009
Journal of Wealth Management, Spring 2007
The purpose of this paper is to present a simple quantitative method that improves the risk-adjusted returns across various asset classes. A simple moving average timing model is tested since 1900 on the United States equity market before testing since 1973 on other diverse and publicly traded asset class indices, including the Morgan Stanley Capital International EAFE Index (MSCI EAFE), Goldman Sachs Commodity Index (GSCI), National Association of Real Estate Investment Trusts Index (NAREIT), and United States government 10-year Treasury bonds. The approach is then examined in a tactical asset allocation framework where the empirical results are equity-like returns with bond-like volatility and drawdown.
Number of Pages in PDF File: 47
Keywords: Asset Allocation, Tactical Asset Allocation, GTAA, Quantitative, Hedge
JEL Classification: C00, C10, C50, G00, G11Accepted Paper Series
Date posted: February 11, 2007 ; Last revised: July 15, 2009
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