AssetAllocation (version 1.1.1)

tactical_DualMomentum: Returns allocations for the dual momentum strategy on a given date

Description

tactical_DualMomentum determines asset allocations for a strategy according to the dual momentum approach described in Antonacci (2016) <https://dx.doi.org/10.2139/ssrn.2042750>.

Usage

tactical_DualMomentum(strat, reb_date, P, R, risk_free)

Value

A numeric vector of weights after applying the rule.

Arguments

strat

A list representing an asset allocation strategy. For this particular strategy, strat$asset_class must contain a character vector containing the corresponding asset classes.

reb_date

A date on which the allocation rule is applied.

P

An xts object with daily prices of the tickers in strat.

R

An xts object with daily returns of the tickers in strat.

risk_free

Either an xts object with daily returns of the risk-free asset, or a scalar numeric with the annual risk-free rate in decimals.

Details

Dual momentum sorts assets within each asset class described in strat on a relative basis (i.e. which asset outperforms others within the same asset class) over the last 12 months, as well as whether an asset has positive excess return over the last 12 months. Dual momentum invests in the top performing asset within the asset class, as long as it also has positive excess return over the risk-free rate. Otherwise, the allocation is shifted to the risk-free asset. Any amounts not allocated to risky assets are allocated to the risk-free asset as implemented in the backtest_allocation function.

Examples

dual_mom  <- asset_allocations$tactical$dual_mom
reb_date <- as.Date("2022-03-31")
tactical_DualMomentum(dual_mom,
             reb_date,
             ETFs$Prices[, dual_mom$tickers],
             ETFs$Returns[, dual_mom$tickers],
             ETFs$risk_free)