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Fund Manager Beta in Tactical Asset Allocation

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  • Lee, Woongki

    (Yonsei University)

Abstract

We show that realized returns are shaped by two opposing intertemporal forces. They rise with expected short-term returns but fall when risk subsequently increases. Successful timing therefore requires attention not only to favorable return expectations but also to future risk. This logic leads to a two-component specification of manager beta. One raises exposure when near-term opportunities are favorable, while the other lowers exposure when future risk is expected to rise. Market timing is thus represented as a tactical adjustment of portfolio exposure that seeks gains while limiting losses from subsequent risk increases.

Suggested Citation

  • Lee, Woongki, 2026. "Fund Manager Beta in Tactical Asset Allocation," SocArXiv u8kps_v1, Center for Open Science.
    • Handle: RePEc:osf:socarx:u8kps_v1
    DOI: 10.31235/osf.io/u8kps_v1
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    References listed on IDEAS

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    1. Henriksson, Roy D & Merton, Robert C, 1981. "On Market Timing and Investment Performance. II. Statistical Procedures for Evaluating Forecasting Skills," The Journal of Business, University of Chicago Press, vol. 54(4), pages 513-533, October.
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    3. Campbell, John Y, 1991. "A Variance Decomposition for Stock Returns," Economic Journal, Royal Economic Society, vol. 101(405), pages 157-179, March.
    4. Merton, Robert C, 1981. "On Market Timing and Investment Performance. I. An Equilibrium Theory of Value for Market Forecasts," The Journal of Business, University of Chicago Press, vol. 54(3), pages 363-406, July.
    5. John Y. Campbell, Robert J. Shiller, 1988. "The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors," The Review of Financial Studies, Society for Financial Studies, vol. 1(3), pages 195-228.
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