Quantitative Approach To Tactical Asset Allocation Strategy
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The Quantitative Approach To Tactical Asset Allocation Strategy(QATAA) by Mebane T. Faber backtest and live signal. For more details please see SSRN paper
The QATAA Strategy allocates 20% across 5 asset classes:
- US Stocks
- Foreign Stocks
- US 10YR Government Bonds
- Real Estate
- Commodities
If asset is above it’s 10 month moving average it gets 20% allocation; otherwise, it’s weight is allocated to cash. The re-balancing process is done Monthly.
Following report is based on Monthly re-balancing, signal is generated one day before the month end, and execution is done at close at the month end.
Load historical data from Yahoo Finance:
#*****************************************************************
# Load historical data
#*****************************************************************
library(SIT)
load.packages('quantmod')
tickers = '
US.STOCKS = VTI + VTSMX
FOREIGN.STOCKS = VEU + FDIVX
US.10YR.GOV.BOND = IEF + VFITX
REAL.ESTATE = VNQ + VGSIX
COMMODITIES = DBC + CRB
CASH = BND + VBMFX
'
# load saved Proxies Raw Data, data.proxy.raw
load('data.proxy.raw.Rdata')
data <- new.env()
getSymbols.extra(tickers, src = 'yahoo', from = '1970-01-01', env = data, raw.data = data.proxy.raw, auto.assign = T, set.symbolnames = T, getSymbols.fn = getSymbols.fn, calendar=calendar)
for(i in data$symbolnames) data[[i]] = adjustOHLC(data[[i]], use.Adjusted=T)
bt.prep(data, align='remove.na', dates='::')
print(last(data$prices))| US.STOCKS | FOREIGN.STOCKS | US.10YR.GOV.BOND | REAL.ESTATE | COMMODITIES | CASH | |
|---|---|---|---|---|---|---|
| 2016-06-24 | 104.05 | 41.22 | 112.21 | 84.86 | 15.01 | 83.7 |
#*****************************************************************
# Setup
#*****************************************************************
data$universe = data$prices > 0
# do not allocate to CASH
data$universe$CASH = NA
prices = data$prices * data$universe
n = ncol(prices)Code Strategy Rules:
#*****************************************************************
# Code Strategy
#******************************************************************
sma = bt.apply.matrix(prices, SMA, 200)
# If asset is above it's 10 month moving average it gets 20% allocation
weight = iif(prices > sma, 20/100, 0)
# otherwise, it's weight is allocated to cash
weight$CASH = 1 - rowSums(weight)
obj$weights$strategy = weight[period.ends,]
#Strategy Performance:
| strategy | |
|---|---|
| Period | May1996 - Jun2016 |
| Cagr | 9.23 |
| Sharpe | 1.14 |
| DVR | 1.12 |
| R2 | 0.98 |
| Volatility | 8.02 |
| MaxDD | -13.48 |
| Exposure | 99.72 |
| Win.Percent | 64.15 |
| Avg.Trade | 0.2 |
| Profit.Factor | 2.04 |
| Num.Trades | 993 |
#Monthly Results for strategy :
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Year | MaxDD | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1996 | 1.3 | 0.2 | -0.2 | 1.7 | 2.2 | 1.7 | -0.9 | 6.2 | -1.8 | |||||
| 1997 | 0.2 | 0.0 | -0.6 | 0.9 | 4.0 | 2.2 | 3.8 | -2.2 | 5.0 | -1.8 | -0.2 | 1.5 | 13.3 | -5.0 |
| 1998 | 1.0 | 2.0 | 2.5 | 0.3 | 0.0 | 1.1 | -0.1 | -4.7 | 2.3 | -0.6 | 0.3 | 2.1 | 6.0 | -7.0 |
| 1999 | 1.4 | -2.7 | 1.9 | 2.5 | -1.9 | 3.1 | -0.6 | 1.0 | 1.2 | 0.3 | 3.2 | 4.7 | 14.8 | -3.6 |
| 2000 | -1.2 | 3.1 | 1.8 | -1.3 | 0.9 | 3.4 | 0.3 | 2.1 | -1.2 | -1.2 | 2.4 | 2.2 | 11.9 | -4.2 |
| 2001 | 1.1 | 0.1 | -0.6 | -0.1 | 0.9 | 1.5 | 1.4 | 1.6 | 0.2 | 0.8 | -1.6 | -0.2 | 5.3 | -3.3 |
| 2002 | 0.1 | 1.1 | -0.2 | -0.1 | 0.8 | 0.8 | -2.5 | 2.1 | 1.3 | -0.8 | -0.4 | 3.3 | 5.7 | -5.2 |
| 2003 | 1.5 | 2.3 | -1.8 | 0.7 | 5.3 | 1.2 | 1.1 | 2.3 | 1.3 | 2.9 | 1.7 | 4.4 | 25.5 | -4.0 |
| 2004 | 2.4 | 3.1 | 1.7 | -5.1 | 1.0 | 0.3 | -0.4 | 2.8 | 1.3 | 2.5 | 2.6 | 1.8 | 14.4 | -7.1 |
| 2005 | -2.0 | 3.0 | -0.5 | -0.7 | 1.1 | 2.1 | 3.4 | 1.2 | 1.0 | -3.0 | 2.4 | 2.4 | 10.6 | -4.4 |
| 2006 | 4.4 | -0.9 | 2.5 | 1.7 | -2.3 | 0.7 | 1.5 | 1.3 | 0.2 | 2.8 | 2.5 | -0.4 | 14.8 | -7.4 |
| 2007 | 1.7 | -0.4 | 0.5 | 1.8 | 1.0 | -2.0 | -0.2 | 0.6 | 4.0 | 3.7 | -0.9 | 1.2 | 11.2 | -5.6 |
| 2008 | 0.2 | 2.5 | 0.3 | 0.5 | 0.5 | -1.5 | -1.8 | -0.5 | -2.4 | -2.6 | 4.7 | 5.1 | 4.7 | -13.1 |
| 2009 | -2.5 | -0.6 | 1.5 | -0.2 | 0.1 | 0.0 | 4.5 | 3.5 | 3.4 | -0.8 | 4.5 | 1.4 | 15.6 | -4.9 |
| 2010 | -4.3 | 2.9 | 4.3 | 2.4 | -6.3 | -1.1 | 2.6 | 1.3 | 0.8 | 3.3 | -1.4 | 5.2 | 9.4 | -9.8 |
| 2011 | 1.9 | 3.1 | 0.2 | 4.0 | -1.4 | -2.2 | 0.9 | -3.3 | -2.1 | -0.2 | -0.8 | 1.3 | 0.9 | -13.5 |
| 2012 | 2.7 | 0.3 | 0.8 | 0.3 | -6.2 | 1.8 | 1.3 | 1.6 | 0.6 | -1.3 | 0.6 | 1.5 | 3.8 | -7.7 |
| 2013 | 2.5 | -0.7 | 1.5 | 2.9 | -2.4 | -2.1 | 1.5 | -2.8 | 2.9 | 2.0 | -0.6 | 0.4 | 4.9 | -8.2 |
| 2014 | -0.9 | 2.3 | 0.1 | 1.3 | 1.3 | 1.4 | -1.7 | 2.2 | -3.0 | 3.1 | 1.4 | 0.4 | 8.0 | -3.1 |
| 2015 | 2.6 | -0.7 | 0.1 | -0.3 | -0.2 | -2.4 | 0.8 | -1.4 | 0.8 | -0.2 | -0.3 | -0.3 | -1.7 | -6.2 |
| 2016 | 0.2 | 0.9 | 2.4 | -0.4 | 0.7 | -0.4 | 3.6 | -2.9 | ||||||
| Avg | 0.7 | 1.0 | 0.9 | 0.6 | -0.2 | 0.4 | 0.8 | 0.4 | 1.0 | 0.6 | 1.1 | 1.9 | 9.0 | -6.1 |
#Trades for strategy :
| strategy | weight | entry.date | exit.date | nhold | entry.price | exit.price | return |
|---|---|---|---|---|---|---|---|
| CASH | 80 | 2015-12-31 | 2016-01-29 | 29 | 80.43 | 81.39 | 0.96 |
| US.10YR.GOV.BOND | 20 | 2016-01-29 | 2016-02-29 | 31 | 108.31 | 109.92 | 0.3 |
| CASH | 80 | 2016-01-29 | 2016-02-29 | 31 | 81.39 | 82.09 | 0.68 |
| US.10YR.GOV.BOND | 20 | 2016-02-29 | 2016-03-31 | 31 | 109.92 | 109.85 | -0.01 |
| REAL.ESTATE | 20 | 2016-02-29 | 2016-03-31 | 31 | 75.19 | 83.05 | 2.09 |
| CASH | 60 | 2016-02-29 | 2016-03-31 | 31 | 82.09 | 82.65 | 0.41 |
| US.STOCKS | 20 | 2016-03-31 | 2016-04-29 | 29 | 104.82 | 105.51 | 0.13 |
| US.10YR.GOV.BOND | 20 | 2016-03-31 | 2016-04-29 | 29 | 109.85 | 109.68 | -0.03 |
| REAL.ESTATE | 20 | 2016-03-31 | 2016-04-29 | 29 | 83.05 | 81.1 | -0.47 |
| CASH | 40 | 2016-03-31 | 2016-04-29 | 29 | 82.65 | 82.81 | 0.08 |
| US.STOCKS | 20 | 2016-04-29 | 2016-05-31 | 32 | 105.51 | 107.34 | 0.35 |
| FOREIGN.STOCKS | 20 | 2016-04-29 | 2016-05-31 | 32 | 44.06 | 43.71 | -0.16 |
| US.10YR.GOV.BOND | 20 | 2016-04-29 | 2016-05-31 | 32 | 109.68 | 109.57 | -0.02 |
| REAL.ESTATE | 20 | 2016-04-29 | 2016-05-31 | 32 | 81.1 | 82.92 | 0.45 |
| COMMODITIES | 20 | 2016-04-29 | 2016-05-31 | 32 | 14.58 | 14.71 | 0.18 |
| US.STOCKS | 20 | 2016-05-31 | 2016-06-24 | 24 | 107.34 | 104.05 | -0.61 |
| FOREIGN.STOCKS | 20 | 2016-05-31 | 2016-06-24 | 24 | 43.71 | 41.22 | -1.14 |
| US.10YR.GOV.BOND | 20 | 2016-05-31 | 2016-06-24 | 24 | 109.57 | 112.21 | 0.48 |
| REAL.ESTATE | 20 | 2016-05-31 | 2016-06-24 | 24 | 82.92 | 84.86 | 0.47 |
| COMMODITIES | 20 | 2016-05-31 | 2016-06-24 | 24 | 14.71 | 15.01 | 0.41 |
#Signals for strategy :
| US.STOCKS | FOREIGN.STOCKS | US.10YR.GOV.BOND | REAL.ESTATE | COMMODITIES | CASH | |
|---|---|---|---|---|---|---|
| 2014-10-30 | 20 | 0 | 20 | 20 | 0 | 40 |
| 2014-11-26 | 20 | 0 | 20 | 20 | 0 | 40 |
| 2014-12-30 | 20 | 0 | 20 | 20 | 0 | 40 |
| 2015-01-29 | 20 | 0 | 20 | 20 | 0 | 40 |
| 2015-02-26 | 20 | 20 | 20 | 20 | 0 | 20 |
| 2015-03-30 | 20 | 20 | 20 | 20 | 0 | 20 |
| 2015-04-29 | 20 | 20 | 20 | 20 | 0 | 20 |
| 2015-05-28 | 20 | 20 | 20 | 20 | 0 | 20 |
| 2015-06-29 | 20 | 20 | 0 | 0 | 0 | 60 |
| 2015-07-30 | 20 | 0 | 0 | 0 | 0 | 80 |
| 2015-08-28 | 0 | 0 | 20 | 0 | 0 | 80 |
| 2015-09-29 | 0 | 0 | 20 | 0 | 0 | 80 |
| 2015-10-29 | 20 | 0 | 20 | 20 | 0 | 40 |
| 2015-11-27 | 20 | 0 | 20 | 20 | 0 | 40 |
| 2015-12-30 | 0 | 0 | 0 | 20 | 0 | 80 |
| 2016-01-28 | 0 | 0 | 20 | 0 | 0 | 80 |
| 2016-02-26 | 0 | 0 | 20 | 20 | 0 | 60 |
| 2016-03-30 | 20 | 0 | 20 | 20 | 0 | 40 |
| 2016-04-28 | 20 | 20 | 20 | 20 | 20 | 0 |
| 2016-05-27 | 20 | 20 | 20 | 20 | 20 | 0 |
For your convenience, the Strategy-TAA report can also be downloaded and viewed the pdf format.
(this report was produced on: 2016-06-25)