A Quantitative Approach to Faber's Tactical Asset Allocation
13 Pages Posted: 22 Sep 2009 Last revised: 11 Jul 2012
Date Written: March 9, 2012
Routinely, practictioners and academics alike propose the use of trading strategies with an alleged improvement on the risk-return relation, tipically entailing a considerably higher return for the given level of risk. A very popular example is "A quantitative approach to tactical asset allocation'' by the fund manager M. Faber, a real hit in the SSRN online library. Is this paper a counterexample to market efficiency? We reject this conclusion, showing that a lot of caution should be used in this field, and we indicate a series of bootstrapping experiments which can be easily implemented to evaluate the performance of trading strategies.
Keywords: market efficiency, portfolio selection, bootstrap
JEL Classification: G11
Suggested Citation: Suggested Citation