What is Elastic Asset Allocation?

Multi-factor scoring combining return, low correlation, and low volatility. Cash fraction scales elastically with the number of assets showing negative momentum. Selects top 3 assets by composite score. Monthly rebalancing.

Who created the EAA (Elastic Asset Allocation) strategy?

EAA (Elastic Asset Allocation) was developed by Keller & Butler. It is based on Keller, W.J. & Butler, A. (2014). Elastic Asset Allocation (EAA).

What is the historical return and maximum drawdown of EAA (Elastic Asset Allocation)?

Backtested from 1982-03-31 to 2026-07-03, EAA (Elastic Asset Allocation) returned 9.7% CAGR with a -17.2% maximum drawdown and a Sharpe ratio of 1.00. Past performance does not guarantee future results.

How often is EAA (Elastic Asset Allocation) rebalanced?

EAA (Elastic Asset Allocation) is rebalanced monthly. BestFolio publishes the updated allocation signal each period.

Is EAA (Elastic Asset Allocation) a tactical asset allocation strategy?

Yes. EAA (Elastic Asset Allocation) is a tactical asset allocation (TAA) strategy: it adjusts its holdings based on market signals each period rather than holding a fixed allocation.

EAA (Elastic Asset Allocation) Strategy by Keller & Butler

Name: EAA (Elastic Asset Allocation), Backtest Time Series
Creator: BestFolio
License: https://creativecommons.org/licenses/by-nc/4.0/

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 2026-07-03 (44.3 years): 9.7% CAGR, 1.00 Sharpe, -17.2% max drawdown, 8.9% volatility.

Type: Tactical (TAA)
Author: Keller & Butler
Rebalancing: Monthly
Risk: Moderate
Period: 1982-03-31 to 2026-07-03
CAGR: 9.7%
Sharpe: 1.00
Max Drawdown: -17.2%
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).

EAA (Elastic Asset Allocation): frequently asked questions

What is Elastic Asset Allocation?: Multi-factor scoring combining return, low correlation, and low volatility. Cash fraction scales elastically with the number of assets showing negative momentum. Selects top 3 assets by composite score. Monthly rebalancing.
Who created the EAA (Elastic Asset Allocation) strategy?: EAA (Elastic Asset Allocation) was developed by Keller & Butler. It is based on Keller, W.J. & Butler, A. (2014). Elastic Asset Allocation (EAA).
What is the historical return and maximum drawdown of EAA (Elastic Asset Allocation)?: Backtested from 1982-03-31 to 2026-07-03, EAA (Elastic Asset Allocation) returned 9.7% CAGR with a -17.2% maximum drawdown and a Sharpe ratio of 1.00. Past performance does not guarantee future results.
How often is EAA (Elastic Asset Allocation) rebalanced?: EAA (Elastic Asset Allocation) is rebalanced monthly. BestFolio publishes the updated allocation signal each period.
Is EAA (Elastic Asset Allocation) a tactical asset allocation strategy?: Yes. EAA (Elastic Asset Allocation) is a tactical asset allocation (TAA) strategy: it adjusts its holdings based on market signals each period rather than holding a fixed allocation.

Backtest Performance (1982-03-31 to 2026-07-03)

Metric	EAA (Elastic Asset Allocation)
Compound Annual Growth Rate (CAGR)	9.7%
Maximum Drawdown	-17.2%
Sharpe Ratio	1.00
Sortino Ratio	1.38
Annualized Volatility	8.9%
Calmar Ratio	0.57
Total Return	5925.6%
Backtest Period	44.3 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

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