A Dynamic Asset Allocation Approach to Investing

12 Pages Posted: 3 Aug 2015 Last revised: 6 Nov 2020

Date Written: February 1, 2016

Abstract

The strategic asset allocation approach utilized by the majority of investment institutions to provide investment advice and guidance is based on unrealistic stock return assumptions making the approach less efficient and effective than a dynamic asset allocation approach. This paper proposes utilizing dynamic asset allocation forward-looking return assumptions to identify the most efficient and prudent asset allocation strategy to invest in. We find a cumulative asset growth advantage of 62% vs. a 100% stocks allocation and 32% vs. a strategic asset allocation approach over two full market cycles since 2000.

Keywords: Terry Grennon, asset allocation, strategic asset allocation, dynamic asset allocation, Robert Shiller

Suggested Citation

Grennon, Terry, A Dynamic Asset Allocation Approach to Investing (February 1, 2016). Available at SSRN: https://ssrn.com/abstract=2638805 or http://dx.doi.org/10.2139/ssrn.2638805

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