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A Risk Based Approach to Tactical Asset Allocation

Stefano Colucci

Symphonia Sgr

Dario Brandolini

University of Turin

November 28, 2011

Faber’s 'A Quantitative Approach to Tactical Asset Allocation' (2009) proposes the use of a very simple trading rule to improve the risk-adjusted returns across various asset classes. The purpose of this paper is to present an alternative and simple quantitative risk based portfolio management that improves the risk-adjusted portfolio returns across various asset classes. This approach, based on the conclusions of Brandolini D. – Colucci S. 'Backtesting Value-at-Risk: A comparison between Filtered Bootstrap and Historical Simulation', has been tested since 1974 for calibration and since 2000 in a real backtest. The asset allocation framework is using a combination of indices, including the Standard&Poors 500, Topix, Dax, MSCI United Kingdom, MSCI France, Italy Comit Globale, MSCI Canada, MSCI Emerging Markets , RJ/CRB, Merril Lynch U.S. Treasuries, 7-10 Yrs , and all indices are expressed in US Dollar. Since 2000 the empirical results present equity-like returns with lower volatility and drawdown and only one negative year both in gross and net of costs returns.

Number of Pages in PDF File: 27

Keywords: asset allocation, expected shortfall, filtered bootstrap, VaR, GDP

JEL Classification: G11, G23, C15

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Date posted: November 28, 2011 ; Last revised: December 8, 2011

Suggested Citation

Colucci, Stefano and Brandolini, Dario, A Risk Based Approach to Tactical Asset Allocation (November 28, 2011). Available at SSRN: https://ssrn.com/abstract=1965423 or http://dx.doi.org/10.2139/ssrn.1965423

Contact Information

Stefano Colucci (Contact Author)
Symphonia Sgr ( email )
via Gramsci 7
Torino, Torino 10144
Dario Brandolini
University of Turin ( email )
Via Po 53
Torino, Turin - Piedmont 10100
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