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Volatility Responsive Asset Allocation

Volatility Responsive Asset Allocation

Volatility Responsive Asset Allocation

Interesting paper from Russell that dovetails on some of our research.  They apply volatility to a fixed asset allocation and find that using volatility to adjust weights between stocks and bonds beats the fixed allocation.  A better approach is to use volatility to switch between a trend following strategy (trend following works best in a straight up or down market and suffers in a choppy market) and a counter trend strategy (counter trend works best in a choppy market and can get hurt in a straight up and down market). 

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