Regime-Based Versus Static Asset Allocation: Letting the Data Speak
Peter, Nystrup ; Bo William, Hansson ; Henrik, Madsen and Lindström, Erik LU
(2015)
In Journal of Portfolio Management
42(1).
p.103-109
- Abstract
- Regime shifts present a big challenge to traditional strategic asset allocation. This article investigates whether regimebased asset allocation can effectively respond to changes in financial regimes at the portfolio level, in an effort to provide better long-term results than more static approaches can offer. The authors center their regime-based approach around a regime-switching model with time-varying parameters that can match financial markets’ tendency to change behavior abruptly and the fact that the new behavior often persists for several periods after a change. In an asset universe consisting of a global stock index and a global government bond index, they show that, even without any level of forecasting skill, holding a static... (More)
- Regime shifts present a big challenge to traditional strategic asset allocation. This article investigates whether regimebased asset allocation can effectively respond to changes in financial regimes at the portfolio level, in an effort to provide better long-term results than more static approaches can offer. The authors center their regime-based approach around a regime-switching model with time-varying parameters that can match financial markets’ tendency to change behavior abruptly and the fact that the new behavior often persists for several periods after a change. In an asset universe consisting of a global stock index and a global government bond index, they show that, even without any level of forecasting skill, holding a static portfolio may not be optimal. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/8165472
- author
- Peter, Nystrup
; Bo William, Hansson
; Henrik, Madsen
and Lindström, Erik
LU
- organization
- publishing date
- 2015
- type
- Contribution to journal
- publication status
- published
- subject
- in
- Journal of Portfolio Management
- volume
- 42
- issue
- 1
- pages
- 103 - 109
- publisher
- Institutional Investor Journals Group
- external identifiers
-
- wos:000363998100009
- scopus:84974679318
- ISSN
- 0095-4918
- DOI
- 10.3905/jpm.2015.42.1.103
- language
- English
- LU publication?
- yes
- id
- c2aa0f53-d2d3-48ba-9900-3906b009df57 (old id 8165472)
- alternative location
- http://www.iijournals.com/doi/abs/10.3905/jpm.2015.42.1.103
- date added to LUP
- 2016-04-01 10:16:47
- date last changed
- 2022-04-20 00:31:08
@article{c2aa0f53-d2d3-48ba-9900-3906b009df57,
abstract = {{Regime shifts present a big challenge to traditional strategic asset allocation. This article investigates whether regimebased asset allocation can effectively respond to changes in financial regimes at the portfolio level, in an effort to provide better long-term results than more static approaches can offer. The authors center their regime-based approach around a regime-switching model with time-varying parameters that can match financial markets’ tendency to change behavior abruptly and the fact that the new behavior often persists for several periods after a change. In an asset universe consisting of a global stock index and a global government bond index, they show that, even without any level of forecasting skill, holding a static portfolio may not be optimal.}},
author = {{Peter, Nystrup and Bo William, Hansson and Henrik, Madsen and Lindström, Erik}},
issn = {{0095-4918}},
language = {{eng}},
number = {{1}},
pages = {{103--109}},
publisher = {{Institutional Investor Journals Group}},
series = {{Journal of Portfolio Management}},
title = {{Regime-Based Versus Static Asset Allocation: Letting the Data Speak}},
url = {{http://dx.doi.org/10.3905/jpm.2015.42.1.103}},
doi = {{10.3905/jpm.2015.42.1.103}},
volume = {{42}},
year = {{2015}},
}