Download or read book Asset Allocation with Markovian Regime Switching written by André Barbosa Oliveira and published by . This book was released on 2018 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Regime Switching Models and the Mental Accounting Framework written by Felix Andresen and published by GRIN Verlag. This book was released on 2017-07-18 with total page 107 pages. Available in PDF, EPUB and Kindle. Book excerpt: Master's Thesis from the year 2014 in the subject Economics - Finance, grade: 1,0, Frankfurt School of Finance & Management, language: English, abstract: The main goal of this thesis is to combine all of these concepts into a unified framework, evaluate its feasibility and performance, and to perform an analysis of the most common pitfalls and practical considerations. This unified framework uses both the MVPT and MA approach for asset allocation, but at the same time allows for dynamic and fat-tailed distributions of asset returns. It is implemented in approximately 1200 lines of efficient MATLAB code, which is publicly available at https://github.com/FelixAndresen/RSMentalAccounting. The application is programmed in a way that it is readily expandable to a larger number of assets and other investment approaches. The framework is also independent on the choice of assets, which is why the choice of assets for the illustration of the thesis findings was based on the availability of data. The thesis is structured as follows. Chapter 2 reviews the current literature and theoretical concepts. More specifically, Chapter 2.1 introduces the Mental Accounting framework and the connections and differences to Markowitz’s Mean Variance Portfolio Theory. In Chapter 2.2 the most important concepts of dynamic investment management and stochastic programming are introduced. Chapter 2.3 discusses the regime switching models used to generate scenarios for the stochastic programming approach and the important topic of model selection. Chapter 2.4 gives an overview of Gaussian Mixture Models which present a tool to create the expected distribution used to optimize the asset allocation. In Chapter 3 all the pieces from the theoretical parts are brought together to formulate the dynamic programming models and the hypotheses to be tested in the thesis. The market data used to carry out the analysis is discussed in Chapter 4, as well as some necessary methodology on how to calculate, aggregate and interpret asset returns. Chapter 5 presents exemplary and illustrative results, and discusses the strengths and weaknesses of the MVPT and MA investment approaches. The thesis closes with a summary and conclusion in Chapter 6.

Download or read book Asset Allocation Using Regime Switching Methods written by Sarthak Garg and published by . This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The aim of this thesis is to develop a Markov Regime Switching framework that can be used in asset allocation in conjunction with Modern Portfolio Theory. Modern Portfolio Theory has long been a popular tool among big financial institutions. However, one of its major limitations is assumption of stationary market volatility. In this paper, we develop a single period Mean Variance Optimization model that minimizes the variance of a portfolio subject to a specified expected return by combining Modern Portfolio Theory with a Markov Regime Switching framework. Then, we extend the above developed framework to be used in conjunction with a robust optimization framework as proposed by Goldfarb Iyengar in which regards we were partially successful. The portfolios constructed by the Markov Regime-Switching framework were tested out of sample to outperform those suggested by a Simple MVO One Factor model and the Robust MVO One Factor Model.

Download or read book Business Cycles and Asset Allocation written by Max Chen and published by . This book was released on 2001 with total page 210 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Asset Allocation Problems Under the Discrete Time Regime Switching Model written by Ka-Chun Cheung and published by . This book was released on 2017-01-26 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation, "Optimal Asset Allocation Problems Under the Discrete-time Regime-switching Model" by Ka-chun, Cheung, 張家俊, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: Abstract of the thesis entitled OPTIMAL ASSET ALLOCATION PROBLEMS UNDER THE DISCRETE-TIME REGIME-SWITCHING MODEL submitted by Cheung, Ka Chun for the degree of Doctor of Philosophy at The University of Hong Kong in January 2005 Recently, academics and practitioners have started paying attention to using the Markov Regime-Switching process to model asset price dynamics. The Markov Regime-Switchingmodelcancapturetherealitythattheinvestmentenvironment is changing over time and hence is non-stationary. Another merit of the model is that it can provide a reasonable degree of analytical tractability. In this thesis, the optimal behavior of an investor in a Markov regime-switching environment will be examined. The thesis studies the optimal dynamic asset allocation strategy, the optimal consumption strategy in the presence of default risk, and the optimal surrender strategy of an equity-linked investment product. By employing the concept of stochastic dominance and assuming that the transition matrix is stochasticallymonotone, where both the concept and assumption have natural and appealing financial interpretations, it was shown that the optimal behavior of the investor is consistent with our intuition. As default risk is an important subject in mod- ern finance and actuarial science, this thesis also studies the optimal portfolio problem in which financial instruments are subject to dependent default risks. Sufficient condition to order the optimal allocations was obtained. The analy- sis demonstrates that in the optimal portfolio problem context, the dependency structure between the default risks is essential and cannot be ignored. DOI: 10.5353/th_b3131123 Subjects: Asset allocation - Mathematical models Markov processes

Download or read book Empirical Analysis of Regime focused Asset Allocation Strategies Within a Markov Switching Framework written by Alan O'Sullivan and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Hidden Markov Models for Time Series written by Walter Zucchini and published by CRC Press. This book was released on 2017-12-19 with total page 370 pages. Available in PDF, EPUB and Kindle. Book excerpt: Hidden Markov Models for Time Series: An Introduction Using R, Second Edition illustrates the great flexibility of hidden Markov models (HMMs) as general-purpose models for time series data. The book provides a broad understanding of the models and their uses. After presenting the basic model formulation, the book covers estimation, forecasting, decoding, prediction, model selection, and Bayesian inference for HMMs. Through examples and applications, the authors describe how to extend and generalize the basic model so that it can be applied in a rich variety of situations. The book demonstrates how HMMs can be applied to a wide range of types of time series: continuous-valued, circular, multivariate, binary, bounded and unbounded counts, and categorical observations. It also discusses how to employ the freely available computing environment R to carry out the computations. Features Presents an accessible overview of HMMs Explores a variety of applications in ecology, finance, epidemiology, climatology, and sociology Includes numerous theoretical and programming exercises Provides most of the analysed data sets online New to the second edition A total of five chapters on extensions, including HMMs for longitudinal data, hidden semi-Markov models and models with continuous-valued state process New case studies on animal movement, rainfall occurrence and capture-recapture data

Download or read book Tactical Style Allocation written by Stephen E. Satchell and published by . This book was released on 1996 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Smart Beta Portfolios with Markov Regime Switching Models written by Gabriel Barbe and published by . This book was released on 2016 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: While many researchers have studied the performance of style investing strategies such as value, growth or small caps, studies dealing with the performance of smart beta portfolios are limited. This study tests the performance of a dynamic asset allocation strategy based on various smart beta portfolios that rely on a Markov regime-switching model based on macroeconomic regimes. Results and backtests show that using Markov regimes increases the performance of a dynamic smart beta portfolio based on Markov regimes compared to a static benchmark in-sample, and that such performance begins to erode when utilized out-of-sample considering one friction (trade costs). Also, this study finds that the choice of the economic variable used to estimate the Markov regime switching model is important for the performance of smart beta portfolios using Markov regimes based on macroeconomic indicators.

Download or read book Strategic Asset Allocation and Markov Regime Switch with GARCH Model written by Ph.D. Simi (Wei) and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: During the financial crisis of 2008, the S&P 500 Implied Volatility Index (VIX), known as the “fear gauge”, jumped to 80% of the highest level it has ever reached. Portfolio managers faced tremendous pressures in these environments of such high levels market volatility. Because it is well known that asset allocation dominates portfolio performances, this paper focuses on asset allocation strategies. It develops a strategic asset allocation solution for portfolio management under all conditions and at all levels of market volatility. The approach is to derive a dynamic optimal portfolio that is based on the well-known asset allocation Black-Litterman [1991, 1992] framework. In addition, this paper proposes a methodology that considers the features of volatility regime-switching over time. This new strategic framework allows portfolio managers to derive a systematically optimal portfolio in a timely, accurate fashion.

Download or read book Allocation to Industry Portfolios Under Markov Switching Returns written by Deniz Kebabci and published by . This book was released on 2009 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: [This paper proposes a Gibbs Sampling approach to modeling returns on industry portfolios. We examine how parameter uncertainty in the returns process with regime shifts affects the optimal portfolio choice in the long run for a static buy-and-hold investor. We find that after we incorporate parameter uncertainty and take into account the possible regime shifts in the returns process, the allocation to stocks can be smaller in the long run. We find this result to be true for both the NASDAQ portfolio and the individual high tech and manufacturing sector portfolios. Finally, we include dividend yields and the Treasury bill rate as predictor variables in our model with regime switching returns and find that the effect of these predictor variables is minimal: the allocation to stocks is still generally smaller in the long run.

Download or read book Nonlinear Financial Econometrics Markov Switching Models Persistence and Nonlinear Cointegration written by Greg N. Gregoriou and published by Springer. This book was released on 2010-12-08 with total page 214 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book proposes new methods to value equity and model the Markowitz efficient frontier using Markov switching models and provide new evidence and solutions to capture the persistence observed in stock returns across developed and emerging markets.

Download or read book Investigating Emerging Market Economies Reverse REIT Bond Yield Gap Anomalies written by Daryn Michael Videlefsky and published by . This book was released on 2017 with total page 260 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Asset Allocation Under Multivariate Regime Switching written by Massimo Guidolin and published by . This book was released on 2006 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Macroeconometrics and Time Series Analysis written by Steven Durlauf and published by Springer. This book was released on 2016-04-30 with total page 417 pages. Available in PDF, EPUB and Kindle. Book excerpt: Specially selected from The New Palgrave Dictionary of Economics 2nd edition, each article within this compendium covers the fundamental themes within the discipline and is written by a leading practitioner in the field. A handy reference tool.

Download or read book Hidden Markov Models in Finance written by Rogemar S. Mamon and published by Springer Science & Business Media. This book was released on 2007-04-26 with total page 203 pages. Available in PDF, EPUB and Kindle. Book excerpt: A number of methodologies have been employed to provide decision making solutions globalized markets. Hidden Markov Models in Finance offers the first systematic application of these methods to specialized financial problems: option pricing, credit risk modeling, volatility estimation and more. The book provides tools for sorting through turbulence, volatility, emotion, chaotic events – the random "noise" of financial markets – to analyze core components.

Download or read book Further Applications of Higher order Markov Chains and Developments in Regime switching Models written by Xiaojing Xi and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider a higher-order hidden Markov models (HMM), also called weak HMM (WHMM), to capture the regime-switching and memory properties of financial time series. A technique of transforming a WHMM into a regular HMM is employed, which in turn enables the development of recursive filters. With the use of the change of reference probability measure methodology and EM algorithm, a dynamic estimation of model parameters is obtained. Several applications and extensions were investigated. WHMM is adopted in describing the evolution of asset prices and its performance is examined through a forecasting analysis. This is extended to the case when the drift and volatility components of the logreturns are modulated by two independent WHMMs that are not necessarily having the same number of states. Numerical experiment is conducted based on simulated data to demonstrate the ability of our estimation approach in recovering the true model parameters. The analogue of recursive filtering and parameter estimation to handle multivariate data is also established. Some aspects of statistical inference arising from model implementation such as the assessment of model adequacy and goodness of fit are examined and addressed. The usefulness of the WHMM framework is tested on an asset allocation problem whereby investors determine the optimal investment strategy for the next time step through the results of the algorithm procedure. As an application in the modelling of yield curves, it is shown that the WHMM, with its memory-capturing mechanism, outperforms the usual HMM. A mean-reverting interest rate model is further developed whereby its parameters are modulated by a WHMM along with the formulation of a self-tuning parameter estimation. Finally, we propose an inverse Stieltjes moment approach to solve the inverse problem of calibration inherent in an HMM-based regime-switching set-up.