Roman Chuyan, CFA's  Instablog

Roman Chuyan, CFA
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Frank Donovan, Vice President, Performance Analytics Inc. I am responsible for business development for Performance Analytics Inc., an independent firm based in Boston, which delivers actionable, results-driven asset allocation research to investment management clients. Our research reports are... More
My company:
Performance Analytics
My blog:
Active Equity Allocation - Latest Model Results
  • Forbes: Tactical Asset Allocation Can Improve Risk-Adjusted Returns 0 comments
    Apr 13, 2012 11:17 AM | about stocks: SPY, DIA, QQQ, IWM, HYG, JNK, SHY, TLT

    This article was published on Tactical Asset Allocation Can Improve Risk-Adjusted Returns. "...there is merit to tactical asset allocation strategies versus buy and hold", Forbes says.

    We strongly agree that tactical asset allocation strategies can improve risk/return. In general, these strategies adjust portfolio asset class allocations periodically, to take advantage of differences in their expected performance. For example, if equities are expected to outperform, we would allocate more to equities and less to fixed income and other asset classes (very general, of course, details need to be defined). The key to the success of such strategies is estimating the expected returns for broad asset classes - not an easy feat!

    To do this, one needs a robust model that can estimate expected returns with reasonable probability. We go well beyond using any single variable, such as the one that Forbes highlights, the 50 day/200 day Moving Average Crossover - we use a sub-set of 15 variables that proved to be statistically significant in predicting the expected equity return as part of our PAR model (we also don't use any MA crossovers, because they have a long lag).

    To find out more about how we help investment managers achieve better risk-adjusted returns, visit our site.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: SPY, DIA, QQQ, IWM, HYG, JNK, SHY, TLT
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