Applying Value and Momentum Across Asset Classes in a Quantitative Tactical Asset Allocation Framework

Peng Wang
Georgetown University Investment Office


November 19, 2010


Abstract:      
We present a concise quantitative method for combining value and momentum strategies in a tactical asset allocation framework by directly comparing the attractiveness of valuations across a broad range of asset classes. Our broad and diverse publicly traded asset classes include public equity, investment grade and high yield bonds, cash, Treasury Inflation Protected Securities (TIPS), commodity and real estate. We refine the basic yield approach to valuation by standardizing the value signal using the Z-score. By tactically adjusting the weight of each asset class based on its perceived value and momentum signals, our model shows significant improvement in overall portfolio performance.
Keywords: Value, Momentum, Tactical Asset Allocation, TAA, Asset Classes
Working Paper Series
Date posted: December 17, 2010