Sources of Performance Decay
Above all, the greatest fear in empirical finance is that the out of sample results for a strategy under investigation…
0Permanent Portfolio Shakedown Part II
In Part I of the Permanent Portfolio Shakedown we investigated the history of the approach, tracing it back to Harry…
Adapt or Fail
The previous article in this series discussed the ebb and flow of stock markets as they move through long periods…
Timing the Bull
In prior posts (here and here) we examined the value of simple market timing systems in generating strong risk-adjusted returns…
Taming the Japanese Bear: Nikkei Case Study
The last post explored the efficacy of two simple strategies — a moving average approach, and a momentum strategy —…
Tactical Alpha
irst, note that we will soon be going to press with a new paper, entitled “Tactical Alpha: A Quantitative Case for Active Asset Allocation”. Here is the abstract for the paper:
Grinold linked investment alpha and Information Ratio to the breadth of independent active bets in an investment universe with his Fundamental Law of Active Management. Breadth is often misinterpreted as the number of eligible securities in a manager’s investment universe, but this ignores the impact of correlation. When correlation is considered, a small universe of uncorrelated assets may explain more than half the breadth of a large stock universe. Given low historical correlations between global asset classes in comparison with individual securities in a market, we make the case that investors may be well served by increasing allocations to Tactical Alpha strategies in pursuit of higher Information Ratios. This hypothesis is validated by a novel theoretical analysis, and bolstered by two empirical examples applied to a global asset class universe and U.S. stock portfolios.
UPDATE: THE PAPER IS PUBLISHED! We would encourage those who are interested in global allocation strategies to give our new Tactical Alpha paper a read. We’ve yet to distribute this widely. We believe it provides a strong argument for investors to consider a larger allocation to active asset allocation strategies in general. You’ll be granted immediate access to a pre-release copy here.