%0 Journal Article %A Mirko Cardinale %A Marco Navone %A Andrzej Pioch %T The Power of Dynamic Asset Allocation %D 2014 %R 10.3905/jpm.2014.40.3.047 %J The Journal of Portfolio Management %P 47-60 %V 40 %N 3 %X This article re-assesses the evidence and practical relevance of asset returns’ long-horizon predictability, investigating whether practitioners can profitably exploit predictability patterns by using relatively simple, dynamic asset allocation strategies. The analysis shows forward-looking models that rely on steady-state equations for equities and initial yields to maturity for bonds are far better predictors of markets’ long-run direction than is the industry’s conventional approach, which involves extrapolating from historical averages. Using a long-term U.S. sample from 1926 to 2010, the authors find that predictability translates into significantly better risk-adjusted performance from dynamic asset allocation strategies that rely on forward-looking inputs.TOPICS: Portfolio management/multi-asset allocation, statistical methods, accounting and ratio analysis %U https://jpm.pm-research.com/content/iijpormgmt/40/3/47.full.pdf