Using economic and financial information for active asset allocation decisions: A comparison of alternative approaches

We propose a comparison of the performance of two alternative approaches for tactical asset allocation (TAA) strategies. Both methods rely on the predictability in series of returns. One approach derives optimal aggressiveness factors, which define the weighting in the portfolio, from predictions of higher returns from one asset relative to another. In the other approach the optimal portfolio weights are directly determined from some predictive variables (Ait-Sahalia and Brandt, (2001))