RT Journal Article
SR Electronic
T1 Tactical Asset Allocation with Macroeconomic Factors
JF The Journal of Wealth Management
FD Institutional Investor Journals
SP 58
OP 69
DO 10.3905/jwm.2014.17.1.058
VO 17
IS 1
A1 James Chong
A1 G. Michael Phillips
YR 2014
UL https://pm-research.com/content/17/1/58.abstract
AB Tactical asset allocation is explored using an economic-based factor pricing model. Using a filtering method based on asset responses to the economy and current economic data, alternative optimization methods are considered including equally-weighted, low-volatility, and mean-variance (maximum Sharpe ratio) allocations. Using exchange-traded funds as proxies for asset classes, portfolios were constructed and rebalanced every half year from 2006 through 2013. We find that the economic response filtering with the maximum Sharpe ratio optimization provided the best overall performance in terms of returns while the low- (economic) volatility portfolio had the least volatility.TOPICS: Exchange-traded funds and applications, portfolio construction, performance measurement