In this series, we deep dive into the fundamentals of Adaptive Asset Allocation. Provide an intuitive baseline for Global Tactical Asset Allocation strategies in general.
Keep ReadingAdaptive Asset Allocation
Brexit: A Case Study in Diversification and Downside Protection
The ‘Leave’ outcome was mostly unexpected, as polls run earlier in the week had shown the ‘Remain’ camp to be confidently in control. As a result, stock markets around the world reacted predictably to heightened uncertainty and potential hidden risks on bank balance sheets …
Keep ReadingThe Importance of Asset Allocation vs. Security Selection: A Primer
By far the greatest source of personal consternation as a professional in markets is investors’ obsession with finding the best stocks, or the best stock pickers. The fact that investors pursue this objective at all undermines all meaningful arguments about efficient markets …
Keep ReadingOn Backtesting: An All-New Chapter from our Adaptive Asset Allocation Book
In our book, we spent a great deal of time summarizing the research posted to GestaltU over the years. We did this in order to distill the most salient points, and also to tie seemingly disparate topics together into a cohesive narrative. Our book covers topics ranging from …
Keep ReadingMissing the forest for the trees: Asset allocation over security selection
By far the greatest source of personal consternation as a professional in markets is investors’ obsession with finding the best stocks, or the best stock pickers. The fact that investors pursue this objective at all undermines all meaningful arguments about efficient markets.
Keep ReadingMeasuring Tactical Alpha, Part 2
When we left off in Part 1, we promised to examine how select Global Tactical Asset Allocation products stack up against the Global Market Portfolio from the perspective of several performance measures – particularly Sharpe ratio, alpha and information ratio.
Keep ReadingMeasuring Tactical Alpha, Part 1
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.
Keep ReadingSetting Expectations for Monthly Trading Systems
Systematic researchers overwhelmingly use monthly holding periods to test strategies. This is probably driven by the availability of long-term monthly total return data for a wide variety of indexes, where daily data is more scarce. This is fine to a point, but investors may not be aware of just how sensitive results might be to day-of-the-month effects which may not persist out of sample.
Keep ReadingDynamic Asset Allocation for Practitioners Part 5: Robust Risk Parity
In our article on Structural Diversification we explored the idea of holding a universe of assets which, when assembled in thoughtful proportion, might be expected to protect investors against the four major market regimes that they might encounter over the long term.
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