%0 Journal Article %A T. Daniel Coggin %A Bala G Arshanapalli %T Speed of Adjustment in U.S. Financial Markets %D 2006 %R 10.3905/jpm.2006.611804 %J The Journal of Portfolio Management %P 62-69 %V 32 %N 2 %X This study uses U.S. financial market data from the post-World War II era to examine whether the statistical evidence supports a flexible-weight asset allocation in U.S. financial markets. A variety of econometric tests are developed to estimate the speed of adjustment of economic time series data subject to unit roots and structural breaks. The findings suggest that successful flexible-weight asset allocation is likely to be difficult. Of all the relationships tested, only the long-term government bonds versus S&P 500 relationship is cointegrated with a significant speed of adjustment parameter. This suggests a predictable long-run equilibrium relationship.TOPICS: Portfolio construction, factors, risk premia, portfolio theory %U https://jpm.pm-research.com/content/iijpormgmt/32/2/62.full.pdf