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Dynamic Allocation ...
Dynamic Allocation or Diversification : A Regime-Based Approach to Multiple Assets
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- Nystrup, Peter (author)
- Sampension,Technical University of Denmark
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- Hansen, Bo William (author)
- Sampension
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- Olejasz Larsen, Henrik (author)
- University of Copenhagen,Sampension
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- Madsen, Henrik (author)
- Technical University of Denmark
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- Lindström, Erik (author)
- Lund University,Lunds universitet,Finansiell matematik,Forskargrupper vid Lunds universitet,Financial Mathematics Group,Lund University Research Groups
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(creator_code:org_t)
- 2017-12-22
- 2017
- English 12 s.
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In: Journal of Portfolio Management. - : Pageant Media US. - 0095-4918 .- 2168-8656. ; 44:2, s. 62-73
- Related links:
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http://dx.doi.org/10...
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https://lup.lub.lu.s...
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https://doi.org/10.3...
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Abstract
Subject headings
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- This article investigates whether regime-based asset allocation can effectively respond to changes in financial regimes at the portfolio level in an effort to provide better long-term results when compared to a static 60/40 benchmark. The potential benefit from taking large positions in a few assets at a time comes at the cost of reduced diversification. The authors analyze this trade-off in a multi-asset universe with great potential for static diversification. The regime-based approach is centered around a regime-switching model with time-varying parameters that can match financial markets’ behavior and a new, more intuitive way of inferring the hidden market regimes. The empirical results show that regime-based asset allocation is profitable, even when compared to a diversified benchmark portfolio. The results are robust because they are based on available market data with no assumptions about forecasting skills.
Subject headings
- SAMHÄLLSVETENSKAP -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)
- SOCIAL SCIENCES -- Economics and Business -- Economics (hsv//eng)
Publication and Content Type
- art (subject category)
- ref (subject category)
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