Protected Adaptive Asset Allocation

Mirko Bellu and Claudio Conversano

Finance Research Letters, 2020, vol. 32, issue C

Abstract: Protected Adaptive Asset Allocation (PAAA) is a tactical asset allocation model that targets an optimal risk/returns ratio using both a momentum index to capture the short-run dynamics and cash protection in negative market periods to reduce drawdowns. Empirical evidence shows that PAAA improves upon the performance of alternative models in terms of the risk/return profile when applied to a well-diversified dataset in the long term, based on the results of in/out-of-sample analyses, and when the analysis is restricted to a financial crisis period. For less diversified portfolios, PAAA is equivalent to an Adaptive Asset Allocation that includes a liquidity component.

Keywords: Adaptive Asset Allocation; Momentum; Cash protection; Sharpe ratio; Modern Portfolio Theory; Portfolio management (search for similar items in EconPapers)
JEL-codes: C58 C61 G11 G12 G14 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:32:y:2020:i:c:s1544612317306426

DOI: 10.1016/j.frl.2019.01.007

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