A Quantitative Approach to Faber's Tactical Asset Allocation

13 Pages Posted: 22 Sep 2009 Last revised: 15 Mar 2012

See all articles by Stefano Marmi

Stefano Marmi

Scuola Normale Superiore

Claudio Pacati

University of Siena - Department of Economics and Statistics

Wiston Adrián Risso

University of Siena - Department of Economics

Roberto Renò

ESSEC Business School

Date Written: March 9, 2012

Abstract

Routinely, practictioners and academics alike propose the use of trading strategies with an alleged improvement on the risk-return relation, tipically entailing a considerably higher return for the given level of risk. A very popular example is "A quantitative approach to tactical asset allocation'' by the fund manager M. Faber, a real hit in the SSRN online library. Is this paper a counterexample to market efficiency? We reject this conclusion, showing that a lot of caution should be used in this field, and we indicate a series of bootstrapping experiments which can be easily implemented to evaluate the performance of trading strategies.

Keywords: market efficiency, portfolio selection, bootstrap

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JEL Classification: G11

Suggested Citation

Marmi, Stefano and Pacati, Claudio and Risso, Wiston Adrián and Renò, Roberto, A Quantitative Approach to Faber's Tactical Asset Allocation (March 9, 2012). Available at SSRN: https://ssrn.com/abstract=1476225 or http://dx.doi.org/10.2139/ssrn.1476225

Stefano Marmi (Contact Author)

Scuola Normale Superiore ( email )

Piazza dei Cavalieri, 7
Pisa, 56126
Italy
+39050509064 (Phone)
+39050563513 (Fax)

HOME PAGE: http://homepage.sns.it/marmi/

Claudio Pacati

University of Siena - Department of Economics and Statistics ( email )

Piazza S. Francesco, 7
Siena, I-53100
Italy

Wiston Adrián Risso

University of Siena - Department of Economics ( email )

Piazza S. Francesco, 7
Siena, I-53100
Italy
00390577235058 (Phone)

Roberto Renò

ESSEC Business School ( email )

3 Avenue Bernard Hirsch
CS 50105 CERGY
CERGY, CERGY PONTOISE CEDEX 95021
France

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