PORTFOLIO OPTIMIZATION IN TACTICAL ASSET ALLOCATION

Although the strategic asset allocation is the most crucial decision required to achieve investment goals, the historical evidence suggests that tactical allocation process may offer good opportunities to enhance long - term portfolio return. The paper presents applications of portfolio selection model in a tactical asset allocation. At first by a combination of a momentum strategy and Markowitz model a dynamized investment strategy is constructed. In the second approach the momentum strategy is combined with Omega function which employs all information contained within the return series and can be used to evaluate and rank portfolio asset. Resulting portfolios are confronted with some standard approaches.