Seminar paper from the year 2012 in the subject Business economics - Investment and Finance, University of Innsbruck, course: Sales Management in Banking and Finance, language: English, abstract: Asset allocation strategies are a frequently discussed topic with increasing importance in times of crisis. Such strategies should prevent us from price deterioration in bad times and ensure high return potentials in good times. More and more tactical asset allocation funds emerge and promise better returns than simple strategy funds. They always try to be on the right market side, in up as well as in down phases. This seminar paper deals with some basic question about what strategic and tactical asset allocation is, when should it be used and if these strategies are appropriate in a highly uncertain environment like the current. It should give the reader a broad overview about the topic by referring to different accepted theories and studies. First the development of asset allocation methods will be described resulting in strategic and tactical asset allocation and an evaluation of them. Furthermore a link toward uncertain market conditions will be compounded.

This book covers each step in the asset allocation process, addressing as many of the relevant questions as possible along the way. How can we formulate expectations about long-term returns? How relevant are valuations? What are the challenges to optimizing the portfolio? Can factor investing add value and, if so, how can it be implemented? Which are the key performance drivers for each asset class, and what determines how they are correlated? How can we apply insights about the business cycle to tactical asset allocation? The book is aimed at finance professionals and others looking for a coherent framework for decision-making in asset allocation, both at the strategic and tactical level. It stresses analysis rather than pre-conceived ideas about investments, and it draws on both empirical research and practical experience to give the reader as strong a background as possible.

We study the effect of parameter uncertainty on the long-run risk for three asset classes: stocks, bills and bonds. We model return dynamics as a Bayesian vector autoregression. With an uninformative prior we find that parameter uncertainty raises the annualised long-run volatilities of all three asset classes proportionally with the same factor relative to estimates that are conditional on ML parameter estimates. Correlations among returns appear robust against parameter uncertainty. As a result the effect of the investment horizon on optimal asset allocations is much weaker compared to models in which only equity returns are subject to parameter uncertainty. While equity is more volatile, the same holds for the other asset classes. Results are sensitive to alternative informative priors, but generally the term structure of risk for stocks and bonds are relatively flat for investment horizons up to 15 years.

Asset allocation has long been viewed as a safe bet for reducing risk in a portfolio. Asset allocators strive to buy when prices are low and sell when prices rise. Tactical asset allocation (TAA) practitioners tend to emphasize shorter-term adjustments, reducing exposure when recent market performance has been good, and increasing exposure in a slipping market (in contrast to dynamic asset allocation, or portfolio insurance). As interest in this technique continues to grow, J.P. Morgan's Wai Lee provides comprehensive coverage of the analytical tools needed to successfully implement and monitor tactical asset allocation.

We know asset allocation theory, and reality is much different in a market meltdown. This book highlights the most critical research tied to investing in up and down market cycles, asset allocation, and investment management over the last 50 years. We start with a critical look at diversification and asset allocation; we provide an in-depth analysis of investing in stocks, we then provide details on two active asset allocation approaches, make a case for index funds, and then introduce you to a management tool which we'll use to manage the asset allocation strategy going forward.

No issue is more critical to institutional investors than asset allocation. In today's volatile and increasingly global financial markets, asset mix and portfolio allocation are ever more important. However, the term asset allocation means different things to different people in different contexts. Whether policy asset allocation, tactical asset allocation or dynamic strategies for asset allocation, the policies and tactics are designed to reshape the return distribution. Because there are a number of decisions to make and issues to evaluate when reviewing asset allocation, this authoritative text assembles some of the best thinking in the investment world today on the subject of asset allocation. In Active Asset Allocation, pension sponsors, endowment and foundation managers and portfolio managers will find answers to many of the perplexing problems of assessing and managing the asset mix. Editors Robert D. Arnott and Frank J. Fabozzi, joined by a host of eminent practitioners and theoreticians, focus on the many dimensions of the asset allocation decision, tactical asset allocation and the risks associated with active asset allocation. Completely revised to reflect the latest thinking, Active Asset Allocation updates the ground-breaking material that made the first edition a critically acclaimed best-seller. Some of these current thoughts on asset allocation are communicated through a comprehensive series of chapters, including Managing the Asset Mix; Asset Performance and Surplus Control; Risk-Adjusted Surplus; Tax Consequences of Trading; A Disciplined Approach to Global Asset Allocation; Does Tactical Asset Allocation Work? and At Last, a Rational Case forLong-Horizon Risk Tolerance and for Asset Allocation Timing?

The fully revised classic on employing asset allocation techniques to grow real wealth A global leader and preeminent expert in asset allocation, David Darst delivers his masterwork on the topic. In a fully updated and expanded second edition of The Art of Asset Allocation, Morgan Stanley's Chief Investment Strategist covers the historic market events, instruments, asset classes, and economic forces that investors need to be aware of as they create asset-building portfolios. He then explains how to use modern asset allocation concepts and tools to augment returns and control risks in a wide range of financial market environments. This completely revised edition shows how to achieve asset balance with the author's proven methods, decades of expertise, relevant charts, practical tools, and astute analyses. Known as the king of asset allocation, Darst brings his expertise to bear to provide complete asset class descriptions, identifying historical risk, return, and correlation characteristics for all major asset classes. Using actual data, he explains the differences between tactical and strategic asset allocation, outlines clear rebalancing guidelines, and includes an annotated guide to both traditional and Internet-based information sources. Praise for the first edition: “You want to be a better investor, a better client, or a better advisor? DEVOUR THIS BOOK NOW!”-James J. Cramer “David Darst is the expert on Asset Allocation. He has chosen to share his decades of practical experience in The Art of Asset Allocation, to the benefit of professional and individual investors alike.”-Seth A. Klarman