Momentum and Mean Reversion in Strategic Asset Allocation

@article{Koijen2009MomentumAM,
  title={Momentum and Mean Reversion in Strategic Asset Allocation},
  author={Ralph S. J. Koijen and Juan Carlos Rodr{\'i}guez and Alessandro Sbuelz},
  journal={Management Science},
  year={2009},
  volume={55},
  pages={1199-1213}
}
We study a dynamic asset allocation problem in which expected stock returns are predictable, focusing on an investor with a medium-term horizon of up to five years. At these horizons, both return continuation (momentum) and mean-reversion are of central importance in the asset allocation problem. Researchers have extensively investigated the impact of mean-reversion on optimal portfolio choice, but its interplay with return continuation has not been explicitly addressed so far. We introduce a… CONTINUE READING
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