Performance persistence and optimal asset allocation strategies

This study explores whether optimal asset allocation strategies, defined by permutations and combinations of different predictor variables, produce consistently superior performance for investors. We extend the literature by exploring whether such strategies benefit investors over the entire investment period or whether investors are forced to switch among alternative strategies over time. As benchmarks, we employ the 1/N (equally weighted) and the myopic (no predictability) strategies. Persistence tests suggest that no single optimal strategy outperforms the remaining optimal and benchmark strategies over the entire sample. However, in two out of three subsample periods, some optimal strategies persistently outperform the benchmarks.