scholarly journals Long-term asset allocation, risk tolerance and market sentiment

2019 ◽  
Vol 62 ◽  
pp. 1-19 ◽  
Author(s):  
Deniz Erdemlioglu ◽  
Robert Joliet
Keyword(s):  
Asset Allocation ◽  
Risk Tolerance ◽  
Market Sentiment

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.

DYNAMIC ASSET ALLOCATION FOR TARGET DATE FUNDS UNDER THE BENCHMARK APPROACH

2021 ◽  
pp. 1-26
Author(s):  
Jin Sun ◽  
Dan Zhu ◽  
Eckhard Platen
Keyword(s):  
Asset Allocation ◽  
Dynamic Asset Allocation ◽  
Growth Optimal Portfolio ◽  
Risky Assets ◽  
Target Date ◽  
Target Date Funds ◽  
Asset Allocations ◽  
Investment Choices ◽  
Glide Paths

ABSTRACT Target date funds (TDFs) are becoming increasingly popular investment choices among investors with long-term prospects. Examples include members of superannuation funds seeking to save for retirement at a given age. TDFs provide efficient risk exposures to a diversified range of asset classes that dynamically match the risk profile of the investment payoff as the investors age. This is often achieved by making increasingly conservative asset allocations over time as the retirement date approaches. Such dynamically evolving allocation strategies for TDFs are often referred to as glide paths. We propose a systematic approach to the design of optimal TDF glide paths implied by retirement dates and risk preferences and construct the corresponding dynamic asset allocation strategy that delivers the optimal payoffs at minimal costs. The TDF strategies we propose are dynamic portfolios consisting of units of the growth-optimal portfolio (GP) and the risk-free asset. Here, the GP is often approximated by a well-diversified index of multiple risky assets. We backtest the TDF strategies with the historical returns of the S&P500 total return index serving as the GP approximation.

Intelligent Asset Allocation via Market Sentiment Views

2018 ◽  
Vol 13 (4) ◽  
pp. 25-34 ◽  
Author(s):  
Frank Z. Xing ◽  
Erik Cambria ◽  
Roy E. Welsch
Keyword(s):  
Asset Allocation ◽  
Market Sentiment

Impact of volatility and equity market uncertainty on herd behaviour: evidence from UK REITs

2018 ◽  
Vol 11 (2) ◽  
pp. 169-186 ◽  
Author(s):  
Omokolade Akinsomi ◽  
Yener Coskun ◽  
Rangan Gupta ◽  
Chi Keung Marco Lau
Keyword(s):  
Asset Allocation ◽  
Regime Switching ◽  
Stock Exchange ◽  
Equity Market ◽  
Market Uncertainty ◽  
Content Type ◽  
Regime Switching Model ◽  
Switching Model ◽  
Market Sentiment ◽  
The Impact

PurposeThis paper aims to examine herding behaviour among investors and traders in UK-listed Real Estate Investment Trusts (REITs) within three market regimes (low, high and extreme volatility periods) from the period June 2004 to April 2016.Design/methodology/approachObservations of investors in 36 REITs that trade on the London Stock Exchange as at April 2016 were used to analyse herding behaviour among investors and traders of shares of UK REITs, using a Markov regime-switching model.FindingsAlthough a static herding model rejects the existence of herding in REITs markets, estimates from the regime-switching model reveal substantial evidence of herding behaviour within the low volatility regime. Most interestingly, the authors observed a shift from anti-herding behaviour within the high volatility regime to herding behaviour within the low volatility regime, with this having been caused by the FTSE 100 Volatility Index (UK VIX).Originality/valueThe results have various implications for decisions regarding asset allocation, diversification and value management within UK REITs. Market participants and analysts may consider that collective movements and market sentiment/psychology are determinative factors of risk-return in UK REITs. In addition, general uncertainty in the equity market, proxied by the impact of the UK VIX, may also provide a signal for increasing herding-related risks among UK REITs.

Ambiguity aversion and experiential learning: implications for long-term savings decisions

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bryan Foltice ◽  
Rachel Rogers
Keyword(s):  
Decision Making ◽  
Experiential Learning ◽  
Asset Allocation ◽  
Ambiguity Aversion ◽  
Sample Population ◽  
Allocation Decision ◽  
Content Type ◽  
Learning Modules ◽  
Return Data

PurposeThis paper evaluates potential methods for reducing ambiguity surrounding returns on equity to improve long-term savings decisions.Design/methodology/approachWe evaluate 221 undergraduate students in the US and first assess the degree of ambiguity aversion exhibited by individuals in the sample population as they decide between a risky (known probability) option and ambiguous (unknown probability) option pertaining to their chances of winning $0 or $1 in a hypothetical lottery. Similarly, we test whether sampling historical return data through learning modules influences long-term decision making regarding asset allocation within a retirement portfolio.FindingsAllowing participants to experience the underlying probability through sampling significantly influences behavior, as participants were more likely to select the ambiguous option after sampling. Here, we also find that participants who receive interactive learning modules – which require users to manually alter the asset allocation to produce a sample of historical return data based on the specific allocation entered in the model – increase their post-learning equity allocations by 10.1% more than individuals receiving static modules. Interestingly, we find no significant evidence of ambiguity aversion playing a role in the asset allocation decision.Originality/valueWe find that decision-making related to ambiguous and risky options can be substantially influenced by experiential learning. Our study supplements previous literature, providing a link between research on the effect of ambiguity on stock market participation and implementation of educational programs to improve the asset allocation decision for young adults.

Costs and liabilities of US public pension systems in a low-return environment

2020 ◽  
pp. 1-18
Author(s):  
Gang Chen ◽  
David Matkin ◽  
Hyewon Kang
Keyword(s):  
Asset Allocation ◽  
Simulation Method ◽  
Public Pension ◽  
Moderating Effects ◽  
Pension Systems ◽  
Long Term Effect ◽  
Unfunded Liabilities ◽  
Investment Returns ◽  
Investment Portfolios

Abstract In recent years, a growing number of capital market professionals have projected a low-return environment in US investment portfolios – where returns in most asset classes are expected to drop below historical rates. While these specific forecasts may not fully materialize, it is natural for cyclical investment markets to go through extended periods of lower returns, creating significant risks for public pension systems which rely on investment returns to sustain their long-term solvency and offset budgetary contributions. This paper uses a simulation method to examine the long-term effect of a low-return environment on the unfunded liabilities and contribution costs of US public pension systems while considering the moderating effects of asset allocation strategies, amortization approaches, and contribution policies.

scholarly journals Long-Term Strategic Asset Allocation: An Out-of-Sample Evaluation

2015 ◽  
Vol 61 (9) ◽  
pp. 2185-2202 ◽  
Author(s):  
Bart Diris ◽  
Franz Palm ◽  
Peter Schotman
Keyword(s):  
Asset Allocation ◽  
Strategic Asset Allocation ◽  
Out Of Sample
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