Dealing with Sudden Market Regime Change

The realized return of different strategies and asset classes changes dramatically over time. Targeting these varying risk premia promises great opportunity – adjusting portfolio leverage at the right time has the potential to enhance profits in good times and curb losses in bad. The holy grail in investing would be to find ways to pinpoint…

Bear Market Preparation

It sure feels good when the value of your portfolio is rising on an almost daily basis. But, when virtually all assets are going up, that achievement isn´t exactly magic. A rising tide lifts all boats, as the saying goes, and it will pay off in the long run to keep in mind how we…

Working with different Market Regimes Part II

Based on a refined, trustworthy investment philosophy, I return to the practical implementation of a key question: How is successfully adapting an asset allocation to market conditions possible and can it yield higher risk- adjusted returns than a static portfolio?   I concentrate on the third basic building block of my investment philosophy – systematic downside protection through dynamic…

Is Trend Following a figment of the imagination?

Absolute momentum or time series momentum, as trends are called in academia, can be used to time virtually any price series (asset prices, composite indices, equity curves, factors and so on) in such a simple manner, that to be able to gain an advantage over the market that way, seems a bit suspect. Not to mention, that…

6 Adaptive portfolio allocation

Tactically adapting the portfolio allocation to different market environments. As we have already moved well into the realm of active investing, we might as well tackle the next big no-no in the world of finance: market timing. Financial theory claims it doesn’t work, but in recent years more and more studies have appeared suggesting that…