Lazy Momentum with Growth-Trend timing: Resilient Asset Allocation (RAA)

9 Pages Posted: 11 Jan 2021 Last revised: 12 Jan 2021

Date Written: December 20, 2020

Abstract

Resilient Asset Allocation (RAA) is a more aggressive version of our Lethargic Asset Allocation (LAA) strategy. It combines a more robust “All Weather” portfolio with even slower growth-trend (GT) filter and a faster market crash-protection. GT timing goes risk-off only when both the US unemployment (UE) and the US capital markets are bearish. To arrive at RAA, we adapt LAA in three steps. First, the (risky, near-static) portfolio is changed to an even more robust and more diversified “all-weather” portfolio, now with five (instead of four) equal weighted assets and with only bonds as risk-off assets (“cash”). Second, the “canary” technology from our Defensive Asset Allocation (DAA) paper is used for determining the market trend with a faster filter. Third, we change the unemployment trend filter to a slower one, where we simply compare the recent unemployment rate with that of one year ago. As a result, RAA is more aggressive and more robust than LAA, while at the same time nearly as “lazy” with respect to trading and turnover (on average one trading month per year).

Keywords: Keywords: Growth-TrendTiming, Unemployment, Golden Butterfly Portfolio, All-Weather Portfolio, Canary Assets, Trend, Momentum, Drawdown, Crash Protection, Backtesting, LAA, DAA, VAA, PAA, TAA

JEL Classification: C00, C10, C22, G00, G11, G10, G14

Suggested Citation

Keller, Wouter J., Lazy Momentum with Growth-Trend timing: Resilient Asset Allocation (RAA) (December 20, 2020). Available at SSRN: https://ssrn.com/abstract=3752294

Wouter J. Keller (Contact Author)

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, NH 1081 HV
Netherlands
+31622392446 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
557
Abstract Views
1,170
rank
57,451
PlumX Metrics