Tactical Asset Allocation

Tactical asset allocation (TAA) is the practice of actively varying a portfolio’s exposure across asset classes on short-to-medium horizons, in contrast to a fixed strategic allocation. A typical TAA model builds a signal of the state of the economy or assets, converts it to asset forecasts, and maps those forecasts to portfolio weights — with the explicit aim of tilting away from tail-risk scenarios and limiting drawdowns. It is the practical setting in which Regime Classification is most often deployed: regime-switching and clustering models supply the state signal that drives the tactical tilt, as in Oliveira et al. 2025 and the Regime-Based Asset Allocation literature. Whether TAA tilts deliver excess return after costs, or only better risk control, is the same open question that governs the regime-vs-alpha debate in this vault.

Connections

• Regime Classification — relates, source: https://arxiv.org/html/2503.11499v1
• Regime-Based Asset Allocation — relates, source: https://arxiv.org/html/2503.11499v1
• Oliveira et al. 2025 — tests_strategy, source: https://arxiv.org/html/2503.11499v1