@article {Qian39, author = {Edward Qian}, title = {Tactical Asset Allocation with Pairwise Strategies}, volume = {30}, number = {1}, pages = {39--48}, year = {2003}, doi = {10.3905/jpm.2003.319918}, publisher = {Institutional Investor Journals Umbrella}, abstract = {An alternative approach to quantitative tactical asset allocation (TAA) is based on time series forecasting models and mean-variance optimization. The central concept is pairwise TAA, and the correct metric for assessing forecast quality is the pairwise information coefficient. TAA using mean-variance optimization is generally equivalent to a linear combination of pairwise TAA, with the relative weights of the pairs in the combination directly connected to the covariance matrix used in the optimization. TAA managers should avoid using a covariance matrix without knowing its implied pairwise weights, but instead should use pairwise information to influence the choice of the pairwise weights. The expected long-term performance of TAA strategies for a given set of pairwise weights as well as optimal sets of pairwise combinations that attain the maximum information ratio is also derived.}, issn = {0095-4918}, URL = {https://jpm.pm-research.com/content/30/1/39}, eprint = {https://jpm.pm-research.com/content/30/1/39.full.pdf}, journal = {The Journal of Portfolio Management} }