Tactical asset allocation on technical trading rules and data snooping

Junmin Yang, Zhiguang Cao, Qiheng Han and Qiyu Wang

Pacific-Basin Finance Journal, 2019, vol. 57, issue C

Abstract: In this paper, we investigate the performance of tactical asset allocation on technical trading rules controlling for data snooping bias. By using reality check (RC), superior predictive ability (SPA) test and their extensions, and false discovery rate (FDR), we find that none of 15376 technical trading rules at monthly frequency outperforms buy-and-hold (B&H) strategy in terms of 1/N portfolio. In addition, we also investigate the performance of tactical asset allocation in terms of other usual portfolio strategies: minimum variance portfolio (MVP), tangency portfolio (TP), equally weighted risk contribution portfolio (ERCP), most diversified portfolio (MDP), Volatility timing portfolio (VTP) and Reward-to-risk timing portfolio (RRTP). Our empirical study shows that no tactical asset allocation strategies on technical trading rules outperform B&H benchmark. Our findings call into question the value of tactical asset allocation on technical trading rules.

Keywords: RC; SPA; FDR; Tactical Asset allocation (search for similar items in EconPapers)
JEL-codes: G20 G23 J31 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:57:y:2019:i:c:s0927538x18300775

DOI: 10.1016/j.pacfin.2018.08.003

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