The paper addresses flaws in the traditional application of Modern Portfolio Theory related to Strategic Asset Allocation. Estimates of parameters for portfolio optimization based on long-term observed average values are shown to be inferior to alternative estimates based on observations over much shorter time frames. An Adaptive Asset Allocation portfolio assembly framework is then proposed to coherently integrate portfolio parameters in a way that delivers substantially improved performance relative to SAA over the testing horizon.

Keywords: Adaptive Asset Allocation, Asset Allocation, Risk Parity

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