Tactical Asset Allocation (TAA) Signals
Investment managers allocate an investor's capital such that the resulting asset allocation best suits the investor's goals and constraints. The process through which this allocation is defined, implemented and maintained is the investment process. In active investment management, investments are first allocated in a strategic asset allocation (SAA), which then becomes tilted by tactical calls based on changes in capital market expectations. The directions and conviction levels of these calls originate from fundamental research on asset classes (discretionary TAA) or from asset class level return anomalies that are known to have predictive power for some period of time (systematic TAA). The capability to identify alpha-generating TAA signals and adjust portfolios accordingly drives investment manager's ability to create investment returns at the asset class level.
Investment managers use various types of economic data and maintain analytics capabilities and governance boards to revise clients' asset allocations through tactical calls. EventStudyTools' APIs can complement these capabilities: Using CATA, investment managers can develop proprietary sentiment capturing models. With our suite of abnormal effect calculators (AXC), valuation-, momentum, and trend/cycle-based signals can be composed. For example, using the abnormal return calculator's (ARC) outputs, the Treynor ratio could be maintained for stock groupings (e.g., along sectors or geographic markets) in order to inform systematic asset shifts between respective sub asset classes.