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Classical Asset Allocation: Combining Markowitz and Momentum
David Qi
edited Jul 13, 2017

Based on a great paper: Momentum and Markowitz: A Golden Combination by Wouter J. Keller, Adam Butler and Ilya Kipnis, and also a well developed An Open-Source Implementation of the Critical-Line Algorithm for Portfolio Optimization by David H. Bailey and Marcos Lopez de Prado, and also a published strategy by David Edwards.

Which impress me about CAA is in the paper it was tested by 100 years data, and did well in very serious situations, for instance, 1929 and 1987, and sustained a stable growth about 10%, but much less volatility than market. I believe it will do well in the following possible bear market.

The code is quite simple and I strictly follow the strategy description in the paper about CAA strategy.

May someone help to improve the strategy in following aspects but not limited:
1, Find out any problem or polish it to a better performance;
2, Extend to N = 16 or even N = 39 assets to see what will happen;

Enjoy,
David Qi

2 responses
Vladimir
Jul 13, 2017

David,

There is no symbol EW in N = 8 universe, but there is EWJ.
That substantially change performance metrics.

David Qi
Jul 13, 2017

Thanks Vladimir for you point out the issue. I have corrected the code and updated. Although the curve is still stable, the performance seems much poor. Maybe we can find a better asset setup.

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