Global Tactical Cross-Asset Allocation: Applying Value and Momentum Across Asset Classes

34 Pages Posted: 8 Oct 2008 Last revised: 18 Aug 2010

See all articles by David Blitz

David Blitz

Robeco Quantitative Investments

Pim van Vliet

Robeco Quantitative Investments

Multiple version iconThere are 2 versions of this paper

Date Written: September 2008 6,

Abstract

In this paper we examine global tactical asset allocation (GTAA) strategies across a broad range of asset classes. Contrary to market timing for single asset classes and tactical allocation across similar assets, this topic has received little attention in the existing literature. Our main finding is that momentum and value strategies applied to GTAA across twelve asset classes deliver statistically and economically significant abnormal returns. For a long top-quartile and short bottom-quartile portfolio based on a combination of momentum and value signals we find a return of 12% per annum over the 1986-2007 period. Performance is stable over time, also present in an out-of-sample period and sufficiently high to overcome transaction costs in practice. The return cannot be explained by potential structural biases towards asset classes with high risk premiums, nor the Fama French and Carhart hedge factors. We argue that financial markets may be macro inefficient due to insufficient ‘smart money’ being available to arbitrage mispricing effects away.

Keywords: GTAA, value effect, momentum, global asset allocation

JEL Classification: G3, M, G11

Suggested Citation

Blitz, David and van Vliet, Pim, Global Tactical Cross-Asset Allocation: Applying Value and Momentum Across Asset Classes (September 2008 6,). ; ERIM Report Series Reference No. ERS-2008-033-F&A. Available at SSRN: https://ssrn.com/abstract=1276616

David Blitz (Contact Author)

Robeco Quantitative Investments ( email )

Weena 850
Rotterdam, 3014 DA
Netherlands

Pim Van Vliet

Robeco Quantitative Investments ( email )

Rotterdam, 3011 AG
Netherlands

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