The rise of dynamic asset allocation

Michael Kitces | Pinnacle Advisory Group | 22 August 2012

Industry practice for much of the past 60 years since Markowitz's seminal paper on modern portfolio theory has been to assume that markets are at least "relatively" efficient and will follow long-term trends. As a result, the industry has used historical averages of return (mean), volatility (standard deviation), and correlation as inputs to determination an appropriate asset allocation.

Yet the striking reality is tha...