Momentum Investing & Asset Allocation

22 Pages Posted: 11 Oct 2015 Last revised: 1 May 2016

See all articles by Drew Knowles

Drew Knowles

Berkeley Square Capital Management, LLC

Date Written: September 22, 2015

Abstract

This paper highlights the use of a new strategic approach within a quantitative investment methodology in the context of making prudent asset allocation decisions. Three asset classes will frame the dynamic asset allocation discussion: Equities, Fixed Income, and Hedge Funds. The quantitative methodology used is an evolution of J. Welles Wilder’s Relative Strength Index (RSI) first published in New Concepts in Technical Trading Systems . The sample portfolio that was analyzed over several market cycles has demonstrated greater compound returns with less volatility. The result is a set of strategies that yield better risk-adjusted returns to the broad equity markets, broad bond markets, and broad returns of hedge funds. In fact, the portfolios we analyzed delivered significantly higher risk adjusted returns across multiple market cycles.

Keywords: Modern Portfolio Theory, Relative Strength Index, dynamic, asset allocation, quantitative investment methodology, higher risk adjusted return, market cycle, quantum methodology

JEL Classification: E32, E37, G11, G17

Suggested Citation

Knowles, Drew, Momentum Investing & Asset Allocation (September 22, 2015). Available at SSRN: https://ssrn.com/abstract=2670343 or http://dx.doi.org/10.2139/ssrn.2670343

Drew Knowles (Contact Author)

Berkeley Square Capital Management, LLC ( email )

United States

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