Global Tactical Asset Allocation

22 Pages Posted: 9 Sep 2005

See all articles by Magnus Dahlquist

Magnus Dahlquist

Stockholm School of Economics; Swedish House of Finance

Campbell R. Harvey

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)

Date Written: January 31, 2001


We provide a framework for using conditioning information in the process of global asset allocation. While we discuss strategies in a global setting, the same reasoning can be applied to other asset allocation programs with different investment objectives. We examine three levels of asset allocation: unconditional or benchmark allocation, strategic asset allocation, and tactical asset allocation. We show how to use conditioning information in the process of global tactical asset allocation. An important lesson emerges. There is considerable work documenting predictability of returns using past information variables. Many of these variables are related to the stage of the business cycle, and suggest that much of the predictability in these assets, or markets, are common. The fact that returns are predictable means that active asset allocation strategies can outperform passive strategies. Uncovering the predictability is challenging as it but allows managers to beat traditional benchmarks.

Keywords: Benchmarks, strategic asset allocation, tactical asset allocation, dynamic trading strategies, return predictability, trading strategies, active management, passive management, business cycle, yield curve, term structure

JEL Classification: G12

Suggested Citation

Dahlquist, Magnus and Harvey, Campbell R., Global Tactical Asset Allocation (January 31, 2001). Available at SSRN: or

Magnus Dahlquist

Stockholm School of Economics ( email )

Drottninggatan 98
Stockholm, SE-111 60

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm

Campbell R. Harvey (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)


National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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