EFFECT OF TACTICAL ASSET ALLOCATION ON RISK AND RETURN IN THE NIGERIAN STOCK MARKET
EFFECT OF TACTICAL ASSET ALLOCATION ON RISK AND RETURN IN THE NIGERIAN STOCK MARKET

Summary/Abstract: The study examines effect of tactical asset allocation on risk and return in the Nigerian stock market. The study covers the period of 2005 to 2020. Purposive sampling was employed. 90 regularly traded firms were considered as a filter on the sample size. The monthly stock prices, market index, risk-free rate ownership shareholdings, market capitalization, book value of equity, earnings before interest and taxes, total assets and tactical asset allocation were the data used in this study. The study gathered data from the CBN statistical bulletin, Nigeria of Exchange Website and Standard and Poor (S&P). The Fama-MacBeth two-step regression method was employed. The study found that tactical asset allocation shows that it insignificantly improves return and significantly reduces risk under the whole sample sub-period except for the sub-periods in the Nigerian stock market. Thus, tactical asset allocation is a short-term investment strategy that could be used in making optimal decisions in terms of maximizing return and minimizing risk in the Nigerian stock market. The study recommended that tactical asset allocation is a short-term market timing strategy which can be used in Nigerian stock market to maximize return and minimize risk against buy and hold strategy which is passive and long-term in nature.

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