Global Tactical Cross-Asset Allocation: Applying Value And Momentum Across Asset Classes
Source: Erasmus Institue of Management
In this paper, the authors examine Global Tactical Asset Allocation (GTAA) strategies across a broad range of asset classes. Contrary to market timing for single asset classes and tactical allocation across similar assets, this topic has received little attention in the existing literature. The main finding is that momentum and value strategies applied to GTAA across twelve asset classes deliver statistically and economically significant abnormal returns. For a long top-quartile and short bottom-quartile portfolio based on a combination of momentum and value signals they find a return of 12% per annum over the 1986-2007 period. Performance is stable over time, also present in an out-of-sample period and sufficiently high to overcome transaction costs in practice.