Global Tactical Asset Allocation Value and Momentum Combination

This strategy combines both two major investment anomalies: momentum and value.

In their paper cited below, Blitz and Van Vliet provided a hybrid method which combines both the valuation based and momentum based tactical asset allocation portfolios. Since these two strategies tend to behave differently during various economic periods (for example, during an overvalued equity market top, the momentum strategy will start to behave erratically), they act as hedging to each other, thus, reduces overall portfolio risk.  A simple 50% value and 50% momentum portfolio was choosen.

In the 50% momentum part, we model a further breakdown using 1-month and 12-1 (12 month momentum but act 1 month later, a method originally proposed by Jagadeesh and Titman,  or see the stock strategy Jegadeesh's Stock Momentum Strategy).  There are two model portfolios for this strategy.

• Strategy Global Tactical Asset Allocation Momentum is the Global Tactical Asset Allocation (GTAA) momentum strategy proposed in Blitz and Van Vliet's paper.
• Strategy Global Tactical Asset Allocation Value Based is the Global Tactical Asset Allocation (GTAA) (relative) value based strategy proposed in Blitz and Van Vliet's paper.
• Strategy Goldman Sachs Global Tactical Asset Allocations utilizes a similar momentum concept and has been used in large pension and hedge funds of funds.

See Also

• Blitz, David and Van Vliet, Pim,Global Tactical Cross-Asset Allocation: Applying Value and Momentum Across Asset Classes. Journal of Portfolio Management, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1079975

• CXOAdvisory: http://www.cxoadvisory.com/blog/external/blog1-07-08/default.asp