An examination of HMM-based investment strategies for asset allocation

2009 ◽  
Vol 27 (3) ◽  
pp. 204-221 ◽  
Author(s):  
Christina Erlwein ◽  
Rogemar Mamon ◽  
Matt Davison
Keyword(s):  
Asset Allocation ◽  
Investment Strategies

Sovereign wealth fund investments and policy implications: a survey

2015 ◽  
Vol 23 (3) ◽  
pp. 210-229 ◽  
Author(s):  
Chen Meng
Keyword(s):  
Asset Allocation ◽  
Institutional Investors ◽  
Multinational Enterprises ◽  
Data Access ◽  
Policy Implications ◽  
Investment Strategies ◽  
Content Type ◽  
Comprehensive Survey ◽  
Definition Of

Purpose – The purpose of this paper is to address a research gap by providing a comprehensive survey of sovereign wealth funds (SWFs) as international institutional investors and clarifying the definition of SWFs. By doing so, this paper aims to provide a balanced set of policy prescriptions towards SWFs. Design/methodology/approach – This paper conducted a comprehensive survey of world major 24 SWFs with assets under management of 500 million USD between 2008 and 2012. Key dimensions include objectives, funding and governance, asset allocation and investment activities. Findings – SWFs are planning institutions with management direction. They present great variety in terms of funding mechanism, governance, asset allocation and investment strategies, but they in essence pursue financial returns. It is not evident that SWFs are primarily motivated by political objectives and distinctively different from other international institutional investors. Difficulty in interpreting SWFs should not lead to the imposition of constraints on SWFs. Research limitations/implications – More in-depth and dynamic analysis of SWFs requires better data access. For such a purpose, case studies and longitudinal studies should be adopted, with particular emphasis on comparing SWFs with different types of financial institutional investors as well as typical state-owned enterprises (SOEs) and multinational enterprises. Practical implications – This study is trying to demystify SWFs based on a comprehensive survey. As a result, this paper may assist investors, policy-makers and regulators to gain a better understanding of SWFs, their investment behaviours and rationales behind. Social implications – SWFs like other long-term capital is important for economic and job growth. To attract long-term investments, creating an open, unbiased and welcoming investment environment is the key. Originality/value – The contribution of this paper is that we provide a deeper understanding of the strategy and empirics of SWF operations. First, after a clearer definition of the phenomenon of SWFs, we can explain their investment strategies and behaviour as firms. Second, we can derive rational policy prescriptions, and third, we can propose a research agenda that will further deepen our understanding of SWFs and the appropriate policy prescriptions.

scholarly journals The Efficiency of Active Asset Allocation Funds in the Period of Instability at Financial Markets

2012 ◽  
Vol 12 (2) ◽  
pp. 147-159
Author(s):  
Wojciech Krawiec
Keyword(s):  
Financial Markets ◽  
Asset Allocation ◽  
Stock Exchange ◽  
Investment Strategies ◽  
Investment Portfolio ◽  
Investment Funds ◽  
Financial Reports ◽  
Return Rates ◽  
Adequate Information ◽  
Online Investing

Abstract The objective of the hereby paper is the assessment of domestic active asset allocation funds efficiency in the period of 2007-2012, including the comparison of earned return rates against the return rates obtained by other mixed funds, as well as WIG and WIG20 stock exchange indices. Additionally, the purpose of the paper is to analyse the investment policy applied by the above listed funds, carried out based on records included in adequate information prospectuses, and also having considered the investment portfolio compositions presented in annual and 6-month financial reports covering these funds. The assessment of applied investment strategies efficiency is performed based on 12-, 24-, 36-, 48- and 60- month return rates set at the end of 6-month reporting periods. The analysis covered only domestic open-end active asset allocation investment funds included in this group following the definition accepted by Analizy Online investing assets in financial instruments issued by entities, officially seated in Poland or outside Poland and valuating participation units in PLN, which have been operating for at least 24 months from the day of 30th June 2012.

scholarly journals Cases For Asset Allocation

2011 ◽  
Vol 4 (9) ◽  
Author(s):  
Ducksang Choi
Keyword(s):  
Mutual Funds ◽  
Asset Allocation ◽  
Investment Strategies ◽  
Effective Management ◽  
Allocation Policy ◽  
Asset Classes ◽  
Management Approaches ◽  
Limited Partnerships ◽  
Asset Allocations ◽  
Selection Of

<p class="MsoNormal" style="text-align: justify; margin: 0in 34.2pt 0pt 0.5in;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">Diversification is one of the most important parts of the successful portfolio investment.<span style="mso-spacerun: yes;">&nbsp; </span>Within a diversified portfolio an investor should have wide array of assets diversified across multiple classes, including but not limited to stocks, bonds, commodities, currencies, real estates, and limited partnerships.<span style="mso-spacerun: yes;">&nbsp; </span>There are also numbers of different investment strategies to consider when approaching the management of these assets.<span style="mso-spacerun: yes;">&nbsp; </span>Among these management approaches are the techniques of using separately managed accounts, individual securities or brokerage accounts and mutual funds, or a combination of any or all of these.<span style="mso-spacerun: yes;">&nbsp; </span>In addition to these management approaches, there are forces in the financial and global economic universes that need to be appropriately addressed to have effective management of these assets.<span style="mso-spacerun: yes;">&nbsp;&nbsp; </span>It is also important for investors to have the appropriate diversifications as well as asset allocations across multiple asset classes within any portfolios.<span style="mso-spacerun: yes;">&nbsp; </span>&ldquo;Asset allocation policy explains, on average, 93.6 percent of total variation in quarterly returns; in particular plans, it explains no less than 75.5 and up to 98.6 percent of total return variation&rdquo; (Jahnke, William W. 1997).<span style="mso-spacerun: yes;">&nbsp;&nbsp; </span>The allocation and selection of these assets needs to be weighted and selected carefully.</span></span></p>

scholarly journals Optimal Asset Allocation Subject to Withdrawal Risk and Solvency Constraints

Risks ◽  
2022 ◽  
Vol 10 (1) ◽  
pp. 15
Author(s):  
Areski Cousin ◽  
Ying Jiao ◽  
Christian Yann Robert ◽  
Olivier David Zerbib
Keyword(s):  
Asset Allocation ◽  
Optimization Problem ◽  
Financial Institution ◽  
Asset Returns ◽  
Optimal Investment ◽  
Dynamic Programming Principle ◽  
Investment Strategies ◽  
Financial Contracts ◽  
General Utility ◽  
Utility Optimization

This paper investigates the optimal asset allocation of a financial institution whose customers are free to withdraw their capital-guaranteed financial contracts at any time. In accounting for the asset-liability mismatch risk of the institution, we present a general utility optimization problem in a discrete-time setting and provide a dynamic programming principle for the optimal investment strategies. Furthermore, we consider an explicit context, including liquidity risk, interest rate, and credit intensity fluctuations, and show by numerical results that the optimal strategy improves both the solvency and asset returns of the institution compared to a standard institutional investor’s asset allocation.

The return on investment from proportional portfolio strategies

1998 ◽  
Vol 30 (01) ◽  
pp. 216-238 ◽  
Author(s):  
Sid Browne
Keyword(s):  
Asset Allocation ◽  
Return On Investment ◽  
Optimal Growth ◽  
Investment Strategies ◽  
Present Value ◽  
Dynamic Asset Allocation ◽  
Expected Return ◽  
Portfolio Strategies ◽  
Growth Policy ◽  
Risky Investment

Dynamic asset allocation strategies that are continuously rebalanced so as to always keep a fixed constant proportion of wealth invested in the various assets at each point in time play a fundamental role in the theory of optimal portfolio strategies. In this paper we study the rate of return on investment, defined here as the net gain in wealth divided by the cumulative investment, for such investment strategies in continuous time. Among other results, we prove that the limiting distribution of this measure of return is a gamma distribution. This limit theorem allows for comparisons of different strategies. For example, the mean return on investment is maximized by the same strategy that maximizes logarithmic utility, which is also known to maximize the exponential rate at which wealth grows. The return from this policy turns out to have other stochastic dominance properties as well. We also study the return on the risky investment alone, defined here as the present value of the gain from investment divided by the present value of the cumulative investment in the risky asset needed to achieve the gain. We show that for the log-optimal, or optimal growth policy, this return tends to an exponential distribution. We compare the return from the optimal growth policy with the return from a policy that invests a constant amount in the risky stock. We show that for the case of a single risky investment, the constant investor's expected return is twice that of the optimal growth policy. This difference can be considered the cost for insuring that the proportional investor does not go bankrupt.

The return on investment from proportional portfolio strategies

1998 ◽  
Vol 30 (1) ◽  
pp. 216-238 ◽  
Author(s):  
Sid Browne
Keyword(s):  
Asset Allocation ◽  
Return On Investment ◽  
Optimal Growth ◽  
Investment Strategies ◽  
Present Value ◽  
Dynamic Asset Allocation ◽  
Expected Return ◽  
Portfolio Strategies ◽  
Growth Policy ◽  
Risky Investment

Dynamic asset allocation strategies that are continuously rebalanced so as to always keep a fixed constant proportion of wealth invested in the various assets at each point in time play a fundamental role in the theory of optimal portfolio strategies. In this paper we study the rate of return on investment, defined here as the net gain in wealth divided by the cumulative investment, for such investment strategies in continuous time. Among other results, we prove that the limiting distribution of this measure of return is a gamma distribution. This limit theorem allows for comparisons of different strategies. For example, the mean return on investment is maximized by the same strategy that maximizes logarithmic utility, which is also known to maximize the exponential rate at which wealth grows. The return from this policy turns out to have other stochastic dominance properties as well. We also study the return on the risky investment alone, defined here as the present value of the gain from investment divided by the present value of the cumulative investment in the risky asset needed to achieve the gain. We show that for the log-optimal, or optimal growth policy, this return tends to an exponential distribution. We compare the return from the optimal growth policy with the return from a policy that invests a constant amount in the risky stock. We show that for the case of a single risky investment, the constant investor's expected return is twice that of the optimal growth policy. This difference can be considered the cost for insuring that the proportional investor does not go bankrupt.

Globalization, integration and commercial property. Evidence from the UK

1999 ◽  
Vol 17 (1) ◽  
pp. 8-26 ◽  
Author(s):  
Patrick McAllister
Keyword(s):  
Asset Allocation ◽  
Investment Strategies ◽  
Information Costs ◽  
Property Market ◽  
Diversification Strategy ◽  
Institutional Investment ◽  
Commercial Property ◽  
Important Barrier ◽  
The Uk ◽  
Allocation Decisions

This paper analyses trends in direct international property investment by British investing institutions in the 1980s and 1990s. Although it is well established that there is home country bias in all investment sectors, evidence is presented which suggests that it is more pronounced in the direct property sector. The main focus is on barriers to international property investment and, therefore, potential sources of segmentation in the property sector. The research addresses a number of issues relating to levels of international property investment, the linkages between the nature of the core business and investment strategies and the relative importance of high diversification costs. This is carried out by an analysis of the most recent data on British institutional investment trends and by a survey questionnaire of British property professionals involved in asset allocation decisions for the investing institutions. The results indicate that: information costs are the most important barrier to international direct property investment, the high cost of executing a global diversification strategy inhibits international property investment, and institutions who have clients and see business opportunities in international centres are more likely to be interested in international property investment opportunities. The data on asset allocation trends support the view that the property market is significantly less integrated than the other securities markets.

scholarly journals FROM RAGS TO RICHES: ON CONSTANT PROPORTIONS INVESTMENT STRATEGIES

2002 ◽  
Vol 05 (06) ◽  
pp. 563-573 ◽  
Author(s):  
IGOR V. EVSTIGNEEV ◽  
KLAUS REINER SCHENK-HOPPÉ
Keyword(s):  
Financial Market ◽  
Asset Allocation ◽  
Trading Strategies ◽  
Investment Strategies ◽  
Exponential Rate ◽  
Dynamic Asset Allocation ◽  
Stationary Stochastic Processes ◽  
Fixed Constant ◽  
Allocation Strategies ◽  
Constant Prices

This paper studies the performance of self-financing constant proportions trading strategies, i.e. dynamic asset allocation strategies that keep a fixed constant proportion of wealth invested in each asset in all periods in time. We prove that any self-financing constant proportions strategy yields a strictly positive exponential rate of growth of investor's wealth in a financial market in which prices are described by stationary stochastic processes and the price ratios are non-degenerate. This result might be regarded as being counterintuitive because any such strategy yields no increase of wealth under constant prices. We further show that the result also holds under small transaction costs, which is important for the viability of this approach, since constant proportions strategies require frequent rebalancing of the portfolio.

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