The Performance of Asset Allocation Strategies Across Datasets and Over Time

As a result of the financial crisis of 2007–2008 and subsequent central banking decisions, the asset management industry changed its asset allocation choices. Asset managers are focusing their attention on the search for new asset classes by taking advantage of the new opportunities to capture risk premia with the aim of exceeding the returns given by traditional investments, including traded equities, fixed income securities, and cash. By doing so, they are trying to improve the selection of alternative assets, such as commodities that sometimes have relatively low correlations with traditional assets. The chapter begins by describing the principles of asset allocation, distinguishing between passive and active asset allocation, also focusing on beta and alternative beta. It then concentrates on how investors can gain exposure to commodities through different investment vehicles and strategies.

Download Full-text

Out-of-Sample Performance of Asset Allocation Strategies

SSRN Electronic Journal ◽

10.2139/ssrn.1802491 ◽

2008 ◽

Cited By ~ 1

Author(s):

Daniela Kolusheva

Keyword(s):

Asset Allocation ◽

Out Of Sample ◽

Allocation Strategies

Download Full-text

OPTIMAL CONTROL OF THE DECUMULATION OF A RETIREMENT PORTFOLIO WITH VARIABLE SPENDING AND DYNAMIC ASSET ALLOCATION

Astin Bulletin ◽

10.1017/asb.2021.19 ◽

2021 ◽

pp. 1-34

Author(s):

Peter A. Forsyth ◽

Kenneth R. Vetzal ◽

Graham Westmacott

Keyword(s):

Asset Allocation ◽

Asset Returns ◽

Retirement Savings ◽

Allocation Strategy ◽

Investment Portfolio ◽

Dynamic Asset Allocation ◽

Dynamic Strategy ◽

Prior Literature ◽

Weighted Combination ◽

Over Time

Abstract We extend the Annually Recalculated Virtual Annuity (ARVA) spending rule for retirement savings decumulation (Waring and Siegel (2015) Financial Analysts Journal, 71(1), 91–107) to include a cap and a floor on withdrawals. With a minimum withdrawal constraint, the ARVA strategy runs the risk of depleting the investment portfolio. We determine the dynamic asset allocation strategy which maximizes a weighted combination of expected total withdrawals (EW) and expected shortfall (ES), defined as the average of the worst 5% of the outcomes of real terminal wealth. We compare the performance of our dynamic strategy to simpler alternatives which maintain constant asset allocation weights over time accompanied by either our same modified ARVA spending rule or withdrawals that are constant over time in real terms. Tests are carried out using both a parametric model of historical asset returns as well as bootstrap resampling of historical data. Consistent with previous literature that has used different measures of reward and risk than EW and ES, we find that allowing some variability in withdrawals leads to large improvements in efficiency. However, unlike the prior literature, we also demonstrate that further significant enhancements are possible through incorporating a dynamic asset allocation strategy rather than simply keeping asset allocation weights constant throughout retirement.

Download Full-text