PT  - JOURNAL ARTICLE
AU  - T. Daniel Coggin
AU  - Bala G Arshanapalli
TI  - Speed of Adjustment in U.S. Financial Markets
AID  - 10.3905/jpm.2006.611804
DP  - 2006 Jan 31
TA  - The Journal of Portfolio Management
PG  - 62--69
VI  - 32
IP  - 2
4099  - https://pm-research.com/content/32/2/62.short
4100  - https://pm-research.com/content/32/2/62.full
AB  - 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