TY - JOUR T1 - Speed of Adjustment in U.S. Financial Markets JF - The Journal of Portfolio Management SP - 62 LP - 69 DO - 10.3905/jpm.2006.611804 VL - 32 IS - 2 AU - T. Daniel Coggin AU - Bala G Arshanapalli Y1 - 2006/01/31 UR - https://pm-research.com/content/32/2/62.abstract N2 - This study uses U.S. financial market data from the post-World War II era to examine whether the statistical evidence supports a flexible-weight asset allocation in U.S. financial markets. A variety of econometric tests are developed to estimate the speed of adjustment of economic time series data subject to unit roots and structural breaks. The findings suggest that successful flexible-weight asset allocation is likely to be difficult. Of all the relationships tested, only the long-term government bonds versus S&P 500 relationship is cointegrated with a significant speed of adjustment parameter. This suggests a predictable long-run equilibrium relationship.TOPICS: Portfolio construction, factors, risk premia, portfolio theory ER -