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An alternative quantitative approach to tactical asset allocation using the Kalman filter
Dissertation (MSc (Financial Engineering))--University of Pretoria, 2021.
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| Format: | Thesis |
| Language: | English |
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University of Pretoria
2021
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| _version_ | 1867613465016795136 |
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| access_status_str | Open Access |
| author2 | Van Vuuren, Gary |
| author_browse | Van Vuuren, Gary |
| author_facet | Van Vuuren, Gary |
| collection | Thesis |
| dc_rights_str_mv | © 2019 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria. |
| description | Dissertation (MSc (Financial Engineering))--University of Pretoria, 2021. |
| format | Thesis |
| id | oai:repository.up.ac.za:2263/79549 |
| institution | University of Pretoria (South Africa) |
| language | English |
| last_indexed | 2026-06-10T12:36:34.553Z |
| license_str | Other — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UPSpace — University of Pretoria Institutional Repository |
| publishDate | 2021 |
| publishDateRange | 2021 |
| publishDateSort | 2021 |
| publisher | University of Pretoria |
| publisherStr | University of Pretoria |
| record_format | dspace |
| source_str | UPSpace — University of Pretoria Institutional Repository |
| spelling | oai:repository.up.ac.za:2263/79549 An alternative quantitative approach to tactical asset allocation using the Kalman filter Van Vuuren, Gary reder.vanrooyen@gmail.com Van Rooyen, Reder Evert UCTD Dissertation (MSc (Financial Engineering))--University of Pretoria, 2021. Tactical asset allocation (TAA) is a dynamic investment strategy which seeks to actively adjust fund allocation to a variety of asset classes by systematically exploiting inefficiencies and temporary imbalances in equilibrium values. TAA adds value by underweighting fund allocation to those assets whose returns have been forecasted to underperform on a relative basis and overweighting those whose returns were forecasted to indicate outperformance. This approach contrasts with strategic asset allocation (SAA) in which a long-term investment view target allocation is established using a combination of target return and risk tolerance. Portfolio managers who employ TAA as an investment strategy aim to benefit from market timing, a non-trivial exercise involving the entry and exit of selected asset classes based on future performance. TAA decisions are governed by three major considerations: valuation-based approaches, macroeconomic scenarios and technical/quantitative analyses. This work explores a quantitative analytical approach for TAA which adjusts portfolio weights based on forecasted returns of constituent asset classes. Asset returns are forecasted using the Capital Asset Pricing Model (CAPM), complemented with results obtained from the Kalman filter, a Bayesian forecasting tool whose recent application to time-dependent variable estimation has shown promising results. Using a decade of recent monthly return data, the performance of the TAA and SAA approaches are compared using a range of diagnostic metrics. The TAA approach outperforms its SAA counterpart for most of these metrics, even when the most recent returns (i.e. those affected by the coronavirus pandemic) are excluded. Mathematics and Applied Mathematics MSc (Financial Engineering) Unrestricted 2021-04-21T11:39:52Z 2021-04-21T11:39:52Z 2021-09 2021 Dissertation Van Rooyen, RE 2021, An alternative quantitative approach to tactical asset allocation using the Kalman filter, MSc dissertation, University of Pretoria, Pretoria, viewed yyyymmdd http://hdl.handle.net/2263/79549 http://hdl.handle.net/2263/79549 en © 2019 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria. application/pdf University of Pretoria |
| spellingShingle | UCTD An alternative quantitative approach to tactical asset allocation using the Kalman filter |
| title | An alternative quantitative approach to tactical asset allocation using the Kalman filter |
| title_full | An alternative quantitative approach to tactical asset allocation using the Kalman filter |
| title_fullStr | An alternative quantitative approach to tactical asset allocation using the Kalman filter |
| title_full_unstemmed | An alternative quantitative approach to tactical asset allocation using the Kalman filter |
| title_short | An alternative quantitative approach to tactical asset allocation using the Kalman filter |
| title_sort | alternative quantitative approach to tactical asset allocation using the kalman filter |
| topic | UCTD |
| url | http://hdl.handle.net/2263/79549 |