Cointegration and Long-Run Asset Allocation

2011 ◽  
Vol 29 (1) ◽  
pp. 161-173 ◽  
Author(s):  
Ravi Bansal ◽  
Dana Kiku
Keyword(s):  
Asset Allocation ◽  
Long Run

scholarly journals Sector Volatility Spillover and Economic Policy Uncertainty: Evidence from China’s Stock Market

Mathematics ◽  
2021 ◽  
Vol 9 (12) ◽  
pp. 1411
Author(s):  
Xiaqing Su ◽  
Zhe Liu
Keyword(s):  
Economic Policy ◽  
Stock Market ◽  
Asset Allocation ◽  
Policy Uncertainty ◽  
Volatility Spillover ◽  
Economic Policy Uncertainty ◽  
Long Run ◽  
Transmission Structure ◽  
Long Term Impact

Following generalized variance decomposition, we identify the transmission structure of financial shock among ten sectors in China. Then, we examine whether economic policy uncertainty (EPU) affects it through GARCH-MIDAS regression. We find that consumer discretionary, industrials, and materials sectors are systemically important industries during the sample period. Further research of dynamic analysis shows that each sector acts in a time-varying role in this structure. The results of the GARCH-MIDAS regression indicate that none of the selected EPU indexes has a significant long-term impact on the total volatility spillover of the inter-sector stock market in China. However, the EPUs do affect some sectors’ spillover indexes in the long run, and they are significantly heterogeneous. This paper can provide regulatory suggestions for policymakers and reasonable asset allocation and risk avoidance methods for investors.

scholarly journals Capital market development over the long run: the portfolios of UK life assurers over two centuries

2021 ◽  
Author(s):  
David A Bogle ◽  
Christopher Coyle ◽  
John D Turner
Keyword(s):  
Capital Market ◽  
Asset Allocation ◽  
The United States ◽  
Market Development ◽  
Historical Contingency ◽  
Government Response ◽  
Long Run ◽  
The Uk ◽  
Macroeconomic Environment

Abstract What shapes and drives capital market development over the long run? In this paper, using the asset portfolios of UK life assurers, we examine the role of regulation, historical contingency, and political reactions to events on the long-run development of the UK capital market. Government response to events such as war, hegemony-secured peace, and the wider macroeconomic environment was the ultimate determinant of major changes in asset allocation since 1800. Furthermore, when we compare the UK with the United States, we find that regulation played a limited role in shaping the asset portfolios of the UK life assurance industry.

Volatility Trading: What Is the Role of the Long-Run Volatility Component?

2012 ◽  
Vol 47 (2) ◽  
pp. 273-307 ◽  
Author(s):  
Guofu Zhou ◽  
Yingzi Zhu
Keyword(s):  
Asset Allocation ◽  
Stochastic Volatility Model ◽  
Economic Losses ◽  
Recursive Utility ◽  
Elasticity Of Intertemporal Substitution ◽  
Long Run ◽  
Volatility Model ◽  
The Impact ◽  
Hedging Demand

AbstractWe study an investor’s asset allocation problem with a recursive utility and with tradable volatility that follows a 2-factor stochastic volatility model. Consistent with previous findings under the additive utility, we show that the investor can benefit substantially from volatility trading due to hedging demand. Unlike existing studies, we find that the impact of elasticity of intertemporal substitution (EIS) on investment decisions is of 1st-order importance. Moreover, the investor can incur significant economic losses due to model and/or parameter misspecifications where the EIS better captures the investor’s attitude toward risk than the risk aversion parameter.

scholarly journals Art as an Asset: Evidence from Keynes the Collector

2020 ◽  
Vol 10 (3) ◽  
pp. 490-520 ◽  
Author(s):  
David Chambers ◽  
Elroy Dimson ◽  
Christophe Spaenjers
Keyword(s):  
Asset Allocation ◽  
Art Market ◽  
Market Returns ◽  
John Maynard Keynes ◽  
Performance Benchmarking ◽  
Risk Return ◽  
Long Run ◽  
Price Indexes ◽  
Investor Returns ◽  
Editorial Decision

Abstract The risk-return characteristics of art as an asset have been previously studied through aggregate price indexes. By contrast, we examine the long-run buy-and-hold performance of an actual portfolio, namely, the collection of John Maynard Keynes. We find that its performance has substantially exceeded existing estimates of art market returns. Our analysis of the collection identifies general attributes of art portfolios crucial in explaining why investor returns can substantially diverge from market returns: transaction-specific risk, buyer heterogeneity, return skewness, and portfolio concentration. Furthermore, our findings highlight the limitations of art price indexes as a guide to asset allocation or performance benchmarking. (JEL B26, C43, G11, G12, G14, Z11) Received: September 7, 2018: Editorial decision: November 24, 2019 by Editor: Nikolai Roussanov

scholarly journals Diversifikationsvorteile verbriefter Immobilienanlagen in einem Mixed-Asset-Portfolio

2011 ◽  
Vol 12 (2) ◽  
pp. 170-191 ◽  
Author(s):  
Roland Füss ◽  
Felix Schindler
Keyword(s):  
Real Estate ◽  
Asset Allocation ◽  
Hedge Funds ◽  
Cash Flows ◽  
Investment Horizon ◽  
Long Run ◽  
Asset Portfolio ◽  
Asset Classes ◽  
International Investors

AbstractThis article examines whether international investors benefit from adding real estate investment trusts (REITs) to a mixed asset portfolio consisting of global stocks, bonds, hedge funds, and commodities. Previous literature has shown that REITs provide a strong co-movement with direct real estate in the long run. We therefore test the diversification potential of international REITs within the strategic asset allocation. Using the Johansen cointegration technique, we show that there is no long-term co-movement between REITs and the other asset classes in the period from January 1990 to December 2009. Thus, the empirical evidence suggests that REITs improve the diversification potential for active investors and those with a long-term investment horizon by simultaneously generating continuous cash flows.

scholarly journals Optimal portfolio and spending rules for endowment funds

2019 ◽  
Vol 55 (2) ◽  
pp. 671-693
Author(s):  
Muhammad Kashif ◽  
Francesco Menoncin ◽  
Iqbal Owadally
Keyword(s):  
Numerical Analysis ◽  
Asset Allocation ◽  
Optimal Portfolio ◽  
Dynamic Asset Allocation ◽  
Optimal Portfolios ◽  
Allocation Model ◽  
Hybrid Strategy ◽  
Market Growth ◽  
Long Run

AbstractWe investigate the role of different spending rules in a dynamic asset allocation model for university endowment funds. In particular, we consider the fixed consumption-wealth ratio (CW) rule and the hybrid rule which smoothes spending over time. We derive the optimal portfolios under these two strategies and compare them with a theoretically optimal (Merton) strategy. We show that the optimal portfolio with habit is less risky compared to the optimal portfolio without habit. A calibrated numerical analysis on U.S. data shows, similarly, that the optimal portfolio under the hybrid strategy is less risky than the optimal portfolios under both the CW and the classical Merton strategies, in typical market conditions. Our numerical analysis also shows that spending under the hybrid strategy is less volatile than the other strategies. Thus, endowments following the hybrid spending rule use asset allocation to protect spending. However, in terms of the endowment’s wealth, the hybrid strategy comparatively outperforms the conventional Merton and CW strategies when the market is highly volatile but under-performs them when there is strong stock market growth and low volatility. Overall, the hybrid strategy is effective in terms of stability of spending and intergenerational equity because, even if it allows short-term fluctuation in spending, it ensures greater stability in the long run.

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