Download or read book Increased Correlation Among Asset Classes written by Yacine Ait-Sahalia and published by . This book was released on 2014 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop estimators and asymptotic theory to decompose the quadratic covariation between two assets into its continuous and jump components, in a manner that is robust to the presence of market microstructure noise. Using high frequency data on different assets classes, we find that the recent financial crisis led to an increase in both the quadratic variations of the assets and their correlations. However, we find little evidence to suggest a change between the relative contributions of the Brownian and jump components, as both comove. Co-jumps stem from surprising news announcements that occur primarily before the opening of the U.S. market, and are also accompanied by an increase in Brownian-driven correlations.

Download or read book Exploring the Changes in Asset Correlation Over Time written by Zachary Himmel and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the changes in asset correlation over time to better understand the application of Portfolio Theory in the modern era. The goal of the provided research is to provide evidence that asset correlations have changed over time, not only across equities, but across fixed income securities and commodities as well. As a result of these changes, investors can make more educated decisions based on personal risk tolerances, ability to decrease portfolio variance, and investment goals. Assets classes are selected across bonds, commodities, and equities with different characteristics, such as geography, industry exposure, and purpose. Correlation is calculated for four periods of five years beginning in 2001, utilizing monthly returns. Overall, assets classes have been increasing in correlation over time, with the assets selected averaging a 2.68% increase in correlation in each period of five years. On average, equities increased the most, with correlation increasing 9.69% on average across each period of five years, with bonds decreasing in correlation on average by 4.25% for each period of five years, and commodities showing no significant changes in correlation. Between 2011 and 2016, each asset class saw the direction of correlation changes change, possibly due to drastically different foreign economic policies. The remainder of this paper serves as a case study of historical financial events throughout the past twenty years, which provide evidence to an increasingly globalized economy, which has caused more congruency in asset returns. In terms of crafting manageable strategies to average investors, it can be inferred that asset class diversification is a more effective means of lowering portfolio variance and spreading risk than investing in international equities.

Download or read book Asymmetric Dependence in Finance written by Jamie Alcock and published by John Wiley & Sons. This book was released on 2018-02-13 with total page 428 pages. Available in PDF, EPUB and Kindle. Book excerpt: Avoid downturn vulnerability by managing correlation dependency Asymmetric Dependence in Finance examines the risks and benefits of asset correlation, and provides effective strategies for more profitable portfolio management. Beginning with a thorough explanation of the extent and nature of asymmetric dependence in the financial markets, this book delves into the practical measures fund managers and investors can implement to boost fund performance. From managing asymmetric dependence using Copulas, to mitigating asymmetric dependence risk in real estate, credit and CTA markets, the discussion presents a coherent survey of the state-of-the-art tools available for measuring and managing this difficult but critical issue. Many funds suffered significant losses during recent downturns, despite having a seemingly well-diversified portfolio. Empirical evidence shows that the relation between assets is much richer than previously thought, and correlation between returns is dependent on the state of the market; this book explains this asymmetric dependence and provides authoritative guidance on mitigating the risks. Examine an options-based approach to limiting your portfolio's downside risk Manage asymmetric dependence in larger portfolios and alternate asset classes Get up to speed on alternative portfolio performance management methods Improve fund performance by applying appropriate models and quantitative techniques Correlations between assets increase markedly during market downturns, leading to diversification failure at the very moment it is needed most. The 2008 Global Financial Crisis and the 2006 hedge-fund crisis provide vivid examples, and many investors still bear the scars of heavy losses from their well-managed, well-diversified portfolios. Asymmetric Dependence in Finance shows you what went wrong, and how it can be corrected and managed before the next big threat using the latest methods and models from leading research in quantitative finance.

Download or read book Treasury Inflation Protected Securities TIPS as an Asset Class Implicatons for Asset Allocation written by Alexander Hardt and published by GRIN Verlag. This book was released on 2014-07-15 with total page 71 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bachelor Thesis from the year 2014 in the subject Business economics - Investment and Finance, grade: 1,0, Texas A&M University (Texas A&M University-Commerce), language: English, abstract: This thesis examines optimized portfolios of three investor types during four different time intervals ranging from 1998 to 2013 to determine if the inclusion of Treasury Inflation-Protected Securities (TIPS) has benefits for institutional investors such as pension plans, university endowments, foundations and sovereign wealth funds. The three investor types used in this study differ in their risk tolerance, with the more risk-averse investor type choosing not to include certain asset classes in his investment portfolio. The efficient frontier algorithm, developed by Prof. Harry Markowitz, is used to determine whether the inclusion of TIPS improves the risk/return profile of the portfolio. Sharpe ratio, developed by Prof. William Sharpe, is used to measure a portfolio’s risk adjusted performance. The study found that the benefits of the inclusion of TIPS in a portfolio vary by time period and investor type. While all investors were able to improve their risk return profile, the more risk-averse investor type benefits to a larger degree from the inclusion of TIPS. Furthermore, a significant increase in the financial efficiency was only observed in the 1998 to 2002 period. Therefore, the researcher concludes that the TIPS market is quite dynamic and investors need to take into account forward-looking information to profit from the inclusion of TIPS in investment portfolios.

Download or read book Asset Allocation written by William Kinlaw and published by John Wiley & Sons. This book was released on 2021-07-27 with total page 375 pages. Available in PDF, EPUB and Kindle. Book excerpt: Discover a masterful exploration of the fallacies and challenges of asset allocation In Asset Allocation: From Theory to Practice and Beyond—the newly and substantially revised Second Edition of A Practitioner’s Guide to Asset Allocation—accomplished finance professionals William Kinlaw, Mark P. Kritzman, and David Turkington deliver a robust and insightful exploration of the core tenets of asset allocation. Drawing on their experience working with hundreds of the world’s largest and most sophisticated investors, the authors review foundational concepts, debunk fallacies, and address cutting-edge themes like factor investing and scenario analysis. The new edition also includes references to related topics at the end of each chapter and a summary of key takeaways to help readers rapidly locate material of interest. The book also incorporates discussions of: The characteristics that define an asset class, including stability, investability, and similarity The fundamentals of asset allocation, including definitions of expected return, portfolio risk, and diversification Advanced topics like factor investing, asymmetric diversification, fat tails, long-term investing, and enhanced scenario analysis as well as tools to address challenges such as liquidity, rebalancing, constraints, and within-horizon risk. Perfect for client-facing practitioners as well as scholars who seek to understand practical techniques, Asset Allocation: From Theory to Practice and Beyond is a must-read resource from an author team of distinguished finance experts and a forward by Nobel prize winner Harry Markowitz.

Download or read book Asset Allocation and Private Markets written by Cyril Demaria and published by John Wiley & Sons. This book was released on 2021-03-03 with total page 325 pages. Available in PDF, EPUB and Kindle. Book excerpt: The comprehensive guide to private market asset allocation Asset Allocation and Private Markets provides institutional investors, such as pension funds, insurance groups and family offices, with a single-volume authoritative resource on including private markets in strategic asset allocation. Written by four academic and practitioner specialists, this book provides the background knowledge investors need, coupled with practical advice from experts in the field. The discussion focuses on private equity, private debt and private real assets, and their correlation with other asset classes to establish optimized investment portfolios. Armed with the grounded and critical perspectives provided in this book, investors can tailor their portfolio and effectively allocate assets to traditional and private markets in their best interest. In-depth discussion of return, risks, liquidity and other factors of asset allocation takes a more practical turn with guidance on allocation construction and capital deployment, the “endowment model,” and hedging — or lack thereof. Unique in the depth and breadth of information on this increasingly attractive asset class, this book is an invaluable resource for investors seeking new strategies. Discover alternative solutions to traditional asset allocation strategies Consider attractive returns of private markets Delve into private equity, private debt and private real assets Gain expert perspectives on correlation, risk, liquidity, and portfolio construction Private markets represent a substantial proportion of global wealth. Amidst disappointing returns from stocks and bonds, investors are increasingly looking to revitalise traditional asset allocation strategies by weighting private market structures more heavily in their portfolios. Pension fund and other long-term asset managers need deeper information than is typically provided in tangential reference in broader asset allocation literature; Asset Allocation and Private Markets fills the gap, with comprehensive information and practical guidance.

Download or read book The New Science of Asset Allocation written by Thomas Schneeweis and published by John Wiley & Sons. This book was released on 2010-02-12 with total page 422 pages. Available in PDF, EPUB and Kindle. Book excerpt: A feasible asset allocation framework for the post 2008 financial world Asset allocation has long been a cornerstone of prudent investment management; however, traditional allocation plans failed investors miserably in 2008. Asset allocation still remains an essential part of the investment arena, and through a new approach, you'll discover how to make it work. In The New Science of Asset Allocation, authors Thomas Schneeweis, Garry Crowder, and Hossein Kazemi first explore the myths that plague this field then quickly move on to examine how the practice of asset allocation has failed in recent years. They then propose new allocation models that employ liquidity, transparency, and real risk controls across multiple asset classes. Outlines a new approach to asset allocation in a post-2008 world, where risk seems hidden The "great manager" problem is examined with solutions on how to capture manager alpha while limiting downside risk A complete case study is presented that allocates for beta and alpha Written by an experienced team of industry leaders and academic experts, The New Science of Asset Allocation explains how you can effectively apply this approach to a financial world that continues to change.

Download or read book Global Asset Allocation written by Heinz Zimmermann and published by John Wiley & Sons. This book was released on 2003-02-03 with total page 340 pages. Available in PDF, EPUB and Kindle. Book excerpt: Reveals new methodologies for asset pricing within a global asset allocation framework. Contains cutting-edge empirical research on global markets and sectors of the global economy. Introduces the Black-Litterman model and how it can be used to improve global asset allocation decisions.

Download or read book Asset Class Jumps written by Ben R. Marshall and published by . This book was released on 2018 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider the frequency and correlation of extreme return observations or “jumps” across equities, Treasury bonds, corporate bonds, currencies, commodities, and real estate. Understanding more about jumps is important to investors as diversification across asset classes is diminished if jumps occur often and are highly correlated. Our results indicate that the presence of jumps in all assets. However, the average jump correlation across asset classes is just -0.01, which clearly indicates that diversifying across asset classes provides a meaningful reduction in the jump risk an investor is exposed to.

Download or read book The Intelligent Asset Allocator How to Build Your Portfolio to Maximize Returns and Minimize Risk written by William J. Bernstein and published by McGraw Hill Professional. This book was released on 2000-10-13 with total page 225 pages. Available in PDF, EPUB and Kindle. Book excerpt: Time-Tested Techniques - Safe, Simple, and Proven Effective - for Building Your Own Investment Portfolio. "As its title suggest, Bill Bernstein's fine book honors the sensible principles of Benjamin Graham in the Intelligent Investor Bernstein's concepts are sound, his writing crystal clear, and his exposition orderly. Any reader who takes the time and effort to understand his approach to the crucial subject of asset allocation will surely be rewarded with enhanced long-term returns." - John C. Bogle, Founder and former Chief Executive Officer, The Vanguard Group President, Bogle Financial Markets Research Center Author, common Sense on Mutual Funds. "Bernstein has become a guru to a peculiarly '90s group: well-educated, Internet-powered people intent on investing well - and with minimal 'help' from professional Wall Street." - Robert Barker, Columnist, BusinessWeek. "I go home and tell my wife sometimes, 'I wonder if [Bernstein] doesn't know more than me.' It's humbling." - John Rekenthaler, Research Chief, Morningstar Inc. William Bernstein is an unlikely financial hero. A practicing neurologist, he used his self-taught investment knowledge and research to build one of today's most respected investor's websites. Now, let his plain-spoken The Intelligent Asset Allocator show you how to use the time-honored techniques of asset allocation to build your own pathway to financial security - one that is easy-to-understand, easier-to-apply, and supported by 75 years of solid history and wealth-building results.

Download or read book Risk Based and Factor Investing written by Emmanuel Jurczenko and published by Elsevier. This book was released on 2015-11-24 with total page 488 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is a compilation of recent articles written by leading academics and practitioners in the area of risk-based and factor investing (RBFI). The articles are intended to introduce readers to some of the latest, cutting edge research encountered by academics and professionals dealing with RBFI solutions. Together the authors detail both alternative non-return based portfolio construction techniques and investing style risk premia strategies. Each chapter deals with new methods of building strategic and tactical risk-based portfolios, constructing and combining systematic factor strategies and assessing the related rules-based investment performances. This book can assist portfolio managers, asset owners, consultants, academics and students who wish to further their understanding of the science and art of risk-based and factor investing. Contains up-to-date research from the areas of RBFI Features contributions from leading academics and practitioners in this field Features discussions of new methods of building strategic and tactical risk-based portfolios for practitioners, academics and students

Download or read book Multi Asset Class Investment Strategy written by Guy Fraser-Sampson and published by John Wiley & Sons. This book was released on 2006-07-11 with total page 320 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book explains that instead of asset allocation being set in an isolated and arbitrary fashion, it is in fact the way in which specific hurdle investment returns can be targeted, and that this approach is already in use in the US (and has been for many years). It involves extended and detailed financial analysis of various asset class returns and proposes a five-asset class approach for future use. Opening with a study of the historic asset allocation practice of UK pension funds, the book shows how the current approach has led to the present funding crisis. It goes on to compare and contrast the UK approach with that of the US and to propose a new approach to UK asset allocation: the five asset class approach ("MAC Investing"). The book reviews and analyses different asset classes based on historic returns, examines risk, and concludes with a suggestion of the five asset classes to use; Quoted equities (both Domestic and foreign), hedge funds, private equity and property. This book also includes benchmark performance figures never previously published.

Download or read book Factor Investing and Asset Allocation A Business Cycle Perspective written by Vasant Naik and published by CFA Institute Research Foundation. This book was released on 2016-12-30 with total page 192 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Genuine and Spurious Serial Correlations in Asset Returns An Illustration written by Didier Maillard and published by . This book was released on 2019 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Asset returns in efficient markets should not display serial correlations. Otherwise, asset prices would be predictable to a certain extent and arbitrage opportunities would appear, contradicting the assumption of efficiency.Lack of serial correlation is considered to be true for most sufficiently traded financial assets. For other assets, such as real assets, and in particular for real estate, a substantial level of serial correlation is suspected, and, as will be seen, verified in practice. There are many factors that may contribute to a high level of serial correlation: high transaction costs, information imperfections, scarcity of transactions, and role of surveys instead of transactions in the process of price formation...This short paper focuses on one hidden factor: averaging. As transactions are scarce, and are related to heterogeneous assets, price indices must be built so as to encompass a minimal period of time: one month at least, generally a quarter, and the resulting index is computed as an average over that period.We show that averaging introduces a .25 serial correlation for basically non-serially correlated asset price moves. For genuinely serially correlated series, averaging increases the measured serial correlation. We check those findings on two large US asset classes: residential real estate and equity.

Download or read book Asset Allocation For Dummies written by Dorianne Perrucci and published by John Wiley & Sons. This book was released on 2009-04-01 with total page 379 pages. Available in PDF, EPUB and Kindle. Book excerpt: An easy-to-understand how-to guide to the single most important thing you can do in investing — choosing and mixing your assets successfully. You don’t need to be an expert analyst, a star stock-picker, or a rocket scientist to have better investment results than most other investors. You just need to allocate your assets in the right way, and have the conviction to stick with that allocation. The big secret behind asset allocation — the secret that most sophisticated investors know and use to their benefit — is that it’s really not all that hard to do. Asset Allocation For Dummies serves as a comprehensive guide to maximizing returns and minimizing risk — while managing taxes, fees and other costs — in putting together a portfolio to reflect your unique financial goals. Jerry A. Miccolis (Basking Ridge, NJ), CFA®, CFP®, FCAS, MAAA is a widely quoted expert commentator who has been interviewed in The New York Times and the Wall Street Journal, and appeared on CBS Radio and ABC-TV. He is a senior financial advisor and co-owner of Brinton Eaton Wealth Advisors (www.brintoneaton.com), a fee-only investment management, tax advisory and financial planning firm in Madison, N.J. Dorianne R. Perrucci (Scotch Plains, NJ) is a freelance writer who has been published in The New York Times, Newsweek, and TheStreet.com, and has collaborated on several financial books, including I.O.U.S.A, One Nation, Under Stress, In Debt (Wiley, 2008).

Download or read book Forecastability of Correlations Between Global Asset Classes written by Sandra Schreiner and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Main Macroeconomic Factors Influencing Asset Allocation in Investment Funds written by Stefan Kljajic and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: One group of academics suggests that all market prices move randomly and the best way to reduce risk and maximize returns is to diversify ones portfolio, even amongst the different asset classes. It also suggests that changes in the main macroeconomic factors (Gross domestic product, inflation rates and money market interest rates) are correlated with changes in the performance of the main asset classes (Equities, Bonds and Commodities), and could therefore serve as predictors of the latter. The paper answers the question: To what extent is there a significant correlation between the changes in the main macroeconomic factors and the changes in the allocation of the main asset classes? As a result of the empirical study, the gross domestic product had an inverse correlation with equities, a non-distinctive correlation with bonds and a partially positive correlation with commodities. The inflation rate had a partially inverse correlation with equities and bonds and a partially positive correlation with commodities. The money market interest rate had a partially positive correlation with equities and bonds and an inverse relationship with commodities.*****One group of academics suggests that all market prices move randomly and the best way to reduce risk and maximize returns is to diversify ones portfolio, even amongst the different asset classes. It also suggests that changes in the main macroeconomic factors (Gross domestic product, inflation rates and money market interest rates) are correlated with changes in the performance of the main asset classes (Equities, Bonds and Commodities), and could therefore serve as predictors of the latter. The paper answers the question: To what extent is there a significant correlation between the changes in the main macroeconomic factors and the changes in the allocation of the main asset classes? As a result of the empirical study, the gross domestic product had an inverse correlation with equities, a non-distinctive correlation with bonds and a partially positive correlation with commodities. The inflation rate had a partially inverse correlation with equities and bonds and a partially positive correlation with commodities. The money market interest rate had a partially positive correlation with equities and bonds and an inverse relationship with commodities.