Traditional systematic investment strategies often struggle to adapt to changing market conditions and shifts in the economic environment. This note introduces MARS (Macro Allocation and Risk System), a framework based on Bayesian statistics and modern macroeconomics, that jointly forecasts asset returns and constructs optimal dynamic portfolios. We explain how we jointly model asset prices and macroeconomic variables to capture their interdependencies and evolving dynamics. By integrating nowcasting techniques and leveraging neural networks for dynamic portfolio optimization, MARS offers a more robust and adaptable framework for investment. This approach is designed to enhance forecasting accuracy, support scenario analysis, and improve risk management, providing a comprehensive solution for navigating the complexities of modern financial markets.
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