tactical_RAA {AssetAllocation}

Returns allocations for the Robust Asset Allocation on a given date

Description

tactical_RAA determines asset allocations for a strategy according to the Robust Asset Allocation (RAA) approach of Gray and Vogel (2015, ISBN:978-1119071501).

Usage

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

Arguments

strat

A list representing an asset allocation strategy.

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

RAA uses two trend-following rules. The first one is based on comparing the current price of assets with their 12-month moving average. The second one compares returns with the returns of the risk-free asset. The allocation rule keeps either 100 if both rules provide a positive signal, only one rule provided a positive signal, or both rules provide a negative signal, respectively. Any amounts not allocated to risky assets are allocated to the risk-free asset as implemented in the backtest_allocation function.

Value

A numeric vector of weights after applying the rule.

Examples

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