A Seasonality Factor in Asset Allocation
Author | : Frank McGroarty |
Publisher | : |
Total Pages | : 40 |
Release | : 2019 |
ISBN-10 | : OCLC:1304266842 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book A Seasonality Factor in Asset Allocation written by Frank McGroarty and published by . This book was released on 2019 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Motivated by the seasonality found in equity returns, we create a Turn-of-the-Month (ToM) allocation strategy in the U.S. equity market and investigate its value in asset allocation. By using a wide variety of portfolio construction techniques in an attempt to address the impact of estimation risk in the input parameters, we show significant out-of-sample benefits from investing in the ToM factor along with a traditional stock-bond portfolio. The out-of-sample benefits remain significant after taking into account transaction costs and by using different rolling estimation windows indicating that a market timing strategy based on the ToM offers substantial benefits to investors when determining the allocation of assets.