Research Briefing | Jan 5, 2023

How our systematic signals can help enhance performance

Our cross asset framework is based on five proprietary indicators (economic cycle, credit impulse, financial stress, relative valuation, and sentiment) and guides our monthly cross-asset risk appetite in our flagship Global Asset Allocation (GAA) reports.

What you will learn:

  • Employing these framework indicators, this paper develops a rules-based approach to global asset allocation which outperforms commonly used benchmarks.
  • To extract a trading signal, we construct a composite measure of risk appetite based on the individual indicators. We find that this aggregated measure tends to deliver higher risk-adjusted returns than each indicator in isolation.
  • A long-only monthly trading strategy that adjusts relative exposure to bonds and equities based on the signal has outperformed a 60/40 benchmark across various macro regimes since 2005, providing significantly higher absolute and risk-adjusted returns.
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