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Strategic asset allocation and market timing: a reinforcement learning approach

  • Thorsten Hens

    ()

  • Peter Wöhrmann

    ()

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    We apply the recurrent reinforcement learning method of Moody, Wu, Liao, and Saffell (1998) in the context of the strategic asset allocation computed for sample data from US, UK, Germany, and Japan. It is found that the optimal asset allocation deviates substantially from the fixed-mix rule. The investor actively times the market and he is able to outperform it consistently over the almost two decades we analyze. Copyright Springer Science+Business Media, LLC 2007

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    File URL: http://hdl.handle.net/10.1007/s10614-006-9064-0
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    Article provided by Society for Computational Economics in its journal Computational Economics.

    Volume (Year): 29 (2007)
    Issue (Month): 3 (May)
    Pages: 369-381

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    Handle: RePEc:kap:compec:v:29:y:2007:i:3:p:369-381
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    9. Michael W. Brandt, 1999. "Estimating Portfolio and Consumption Choice: A Conditional Euler Equations Approach," Journal of Finance, American Finance Association, vol. 54(5), pages 1609-1645, October.
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