In a new article from Institutional Investor—“Market Timing Is Back In The Hunt For Investors”–AQR Capital Management reviews the case for market timing and finds an encouraging track record. Citing the historical record from 1900, AQR’s Cliff Asness and two colleagues outline what is effectively a century-plus backtest of the value and momentum factors. In line with analysis from other researchers, they find that the numbers favor a degree of dynamic portfolio management for adjusting asset allocation through time based on this dual-factor framework. There’s nothing particularly new here, at least for anyone who’s familiar with the research on the topic of tactical asset allocation (TAA) and the related subjects. Nonetheless, this is a worthwhile read if only because it provides a long-run perspective on how the application of value and momentum factors provide a powerful foundation for managing an asset mix through time.
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