EAA (Elastic Asset Allocation)
Calculate 12-month return, correlation to equal-weight portfolio, and volatility for all 10 assets. Backtest max drawdown: -19.5%.
Strategy & methodology
Calculate 12-month return, correlation to equal-weight portfolio, and volatility for all 10 assets; Filter to assets with positive 12-month return (n eligible out of N=10); Cash fraction = 1 - n/N (allocated to BIL); Score eligible…
- Strategy type:
- Tactical asset allocation
- Rebalance frequency:
- Monthly
- Original publication:
- 2014-12-30; results after that are out-of-sample for the original research. All results are backtest simulations.
- Data through:
- Backtest data through 2026-10-01.
Simulated history
Stand-in funds and until when (12)
- HYG: VWEHX before Apr 11, 2007
- VNQ: VGSIX before Sep 29, 2004
- EEM: VEIEX before Apr 14, 2003
- TLT: VUSTX before Jul 26, 2002
- LQD: PIGIX before Jul 26, 2002
- IEF: VFITX before Jul 26, 2002
- EFA: VGTSX before Aug 17, 2001
- LQD: VWESX before Jul 26, 2002
- VNQ: FRESX before Sep 29, 2004
- EFA: PRITX before Aug 17, 2001
- EEM: FEMKX before Apr 14, 2003
- SPY: VFINX before Jan 29, 1993
Before these dates the backtest uses a stand-in, not the fund itself, so the results over those stretches show how the rules would have behaved, not what the fund returned.
Research data and disclosures
Calculate 12-month return, correlation to equal-weight portfolio, and volatility for all 10 assets. Backtest max drawdown: -19.5%. This is a tactical asset allocation strategy. BestFolio supplies the public rule or approach and backtest context; current signals, allocations, and paid interactive data remain restricted to Pro access. Users review the published signal and place any resulting trades in their own brokerage. Displayed returns remain hypothetical and do not represent a customer's brokerage record. The facts above show how current the data is.
- BestFolio supplies
- The monthly signal email and this strategy page; current signals and email alerts require Pro access.
- Customer action
- Review the published signal and place any required trades in your own brokerage. BestFolio does not execute orders.
- Costs and exclusions
- Backtests are net of a modeled one-way transaction cost (10 bps, scaled up to 3x under stress); taxes, fund-expense drift, or market impact are not modeled. No tax, no slippage beyond the stated cost. Methodology limitations
Published result: Engine drift-until-flip-v1, data version 8c848c1c, published 2026-10-01
Is EAA (Elastic Asset Allocation) still working in 2026?
EAA (Elastic Asset Allocation) returned 20.65% over the trailing 12 months and 93.82% over 36 months through 2026-10-01, compared with a full-backtest annualized return of 10.06%. Its full-backtest maximum drawdown was -19.48%. The full sample contains 11360 daily NAV observations from 1982-03-31. These are model results, not investor account returns or a promise. As of 2026-10-01 it is -5.33% below its high-water mark of 2026-01-29, 8 months ago, and its longest run below a previous high was 2.9 years. Recent returns do not establish that the strategy will keep working.
| Period | Return | CAGR | Max drawdown | Observations | Dates |
|---|---|---|---|---|---|
| Trailing 12 months | 20.65% | Not annualized | -17.65% | 252 | 2025-10-01 to 2026-10-01 |
| Trailing 36 months | 93.82% | Not annualized | -17.65% | 754 | 2023-09-29 to 2026-10-01 |
| Full backtest | 7009.39% | 10.06% | -19.48% | 11360 | 1982-03-31 to 2026-10-01 |
Last verified
Common questions about these results
Are these live investor returns?
No. These are the latest model NAV results from the published backtest. A recent date alone does not make a result an independently observed live record. Investor costs, taxes and execution can differ.
Why can a strategy lag for a year?
A tactical model can hold defensive assets during a rally or change positions during reversals. A short window can differ substantially from its full history. Compare cumulative returns over matching dates and inspect drawdowns as well.
How long has it spent below a previous high?
Its last high-water mark was 2026-01-29, 8 months before 2026-10-01, and it is -5.33% below that level now. The longest run below a previous high in the full backtest was 2.9 years. Recovering from a drawdown can take years, and a strong trailing return does not mean a past high has been regained.
Where can I check the signals behind these results?
The Signals tab on this page lists each dated model decision for the selected variant; for Pro strategies they are visible to Pro members. The methodology page explains the backtest assumptions.
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 2026-10-01 (44.5 years): 10.1% CAGR, 0.99 Sharpe, -19.5% max drawdown, 9.1% volatility.
- Type
- Tactical (TAA)
- Author
- Keller & Butler
- Rebalancing
- Monthly
- Risk
- Moderate
- Period
- 1982-03-31 to 2026-10-01
- CAGR
- 10.1%
- Sharpe
- 0.99
- Max Drawdown
- -19.5%
- Volatility
- 9.1%
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 2026-10-01, EAA (Elastic Asset Allocation) returned 10.1% CAGR with a -19.5% maximum drawdown and a Sharpe ratio of 0.99. 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 2026-10-01)
| Metric | EAA (Elastic Asset Allocation) |
|---|---|
| CAGR | 10.1% |
| Max Drawdown | -19.5% |
| Sharpe | 0.99 |
| Sortino | 1.70 |
| Volatility | 9.1% |
| Calmar | 0.52 |
| Total Return | 7009.4% |
| Backtest Period | 44.5 years |
Every rebalance fills at the signal-day close, net of modeled transaction costs. Followers trade at the next open; the delayed-close line in the Rebalance Frequency Sensitivity card shows the effect of trading one session later. Execution assumption
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
Further reading
New to this approach? Read what tactical asset allocation is and how it works.
Holding EAA (Elastic Asset Allocation) alongside another strategy? Use the free portfolio overlap calculator to see how much of the two portfolios actually differs.
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