EAA (Elastic Asset Allocation)
TacticalPromoderateBased on research by Keller & Butler · Keller, W.J. & Butler, A. (2014). Elastic Asset Allocation (EAA)
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Launched Dec 30, 2014About this Strategy
Multi-factor scoring combining return, low correlation, and low volatility. Cash fraction scales elastically with the number of assets showing negative momentum.
The complete strategy logic, asset universe, and rebalancing rules are available to Pro subscribers. This includes the full methodology description, author notes, and implementation details.
Pro subscribers also get access to current signals, full backtest history, and the ability to blend this strategy into custom portfolios.
Strategy Rules
Pro subscribers only
- 1Calculate 12-month return, correlation to equal-weight portfolio, and volatility for all 10 assets
- 2Filter to assets with positive 12-month return (n eligible out of N=10)
- 3Cash fraction = 1 - n/N (allocated to BIL)
- 4Score eligible assets: ri^1.0 * (1-ci)^1.0 / vi^0.0 (default: return × diversification)
- 5Select top 3 by score; weight proportionally within the risky allocation (1 - cash fraction)
- 6Universe: SPY, EFA, EEM, VNQ, DBC, GLD, TLT, IEF, LQD, HYG; safety = BIL
Asset Universe
Pro subscribers only
10 instruments this strategy can hold
Key Differentiators
Research Source
Based on research by Keller & Butler
Keller, W.J. & Butler, A. (2014). Elastic Asset Allocation (EAA)
Strategy Info
- Type
- Tactical (TAA)
- Frequency
- monthly
- Next Rebalance
- Jun 109:30 ET (10d)
- Variants
- 2
- Risk Category
- moderate
- Tags
- momentum, multi asset
- Type
- Tactical Asset Allocation (TAA)
- Trading Frequency
- Monthly (last trading day)
- Rebalancing
- Full portfolio rebalance each month
- Universe Size
- 10 risky assets + BIL (safety)
- Momentum Lookback
- 12 months
- Selection
- Top 3 by generalized score
- Scoring Formula
- ri^wR * (1-ci)^wC / vi^wV (default wR=1, wC=1, wV=0)
- Cash Mechanism
- Elastic: cash fraction = 1 - (n positive assets / N total assets)
- Weighting
- Score-proportional among selected assets
- Leverage Options
- 1x (standard)
- Data Source
- Institutional-grade market data (13 months minimum history)
Asset Classes
EAA (Elastic Asset Allocation) at a glance
EAA (Elastic Asset Allocation) is a tactical asset allocation (TAA) strategy by Keller & Butler across US Equity, International Equity, Emerging Markets, REITs, rebalanced monthly. Backtested 1982-03-31 to 2026-05-20 (44.1 years): 10.1% CAGR, 1.11 Sharpe, -16.1% max drawdown, 8.9% volatility.
- Type
- Tactical (TAA)
- Author
- Keller & Butler
- Rebalancing
- Monthly
- Risk
- Moderate
- Period
- 1982-03-31 to 2026-05-20
- CAGR
- 10.1%
- Sharpe
- 1.11
- Max Drawdown
- -16.1%
- Volatility
- 8.9%
EAA (Elastic Asset Allocation) — Tactical Asset Allocation Strategy
Elastic Asset Allocation (EAA) was published by Wouter Keller and Adam Butler in 2014. It is a momentum strategy with an innovative 'elastic' cash mechanism that dynamically adjusts the portfolio's cash allocation based on how many assets in the universe have positive momentum.
The cash fraction is calculated as cf = 1 - n/N, where n is the number of assets with positive 12-month returns and N is the total universe size. When all 10 assets have positive momentum, cash is 0%; when only half do, cash is 50%; when none do, the portfolio is 100% in cash (BIL).
Backtest Performance (1982-03-31 to 2026-05-20)
| Metric | EAA (Elastic Asset Allocation) |
|---|---|
| Compound Annual Growth Rate (CAGR) | 10.1% |
| Maximum Drawdown | -16.1% |
| Sharpe Ratio | 1.11 |
| Sortino Ratio | 1.29 |
| Annualized Volatility | 8.9% |
| Calmar Ratio | 0.63 |
| Total Return | 6795.6% |
| Backtest Period | 44.1 years |
Strategy Details
- Type
- Tactical (TAA)
- Rebalancing
- monthly
- Risk Level
- moderate
- Variants
- 2
- Author
- Keller & Butler
- Source
- Keller, W.J. & Butler, A. (2014). Elastic Asset Allocation (EAA)
Asset Classes
- US Equity
- International Equity
- Emerging Markets
- REITs
- Commodities
- Gold
- Bonds
- Corporate Bonds
- High Yield Bonds
- T-Bills
Categories
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