Share and Export
Share and Export
Flavin, Thomas and Wickens, M.R. (2003) Macroeconomic influences on optimal asset allocation. Review of Financial Economics, 12. pp. 207-231. ISSN 1058-3300
Preview
Flavin_Wickens_RFE_2003.pdf
Download (892kB) | Preview
Abstract
We develop a tactical asset allocation strategy that incorporates the effects of macroeconomic
variables. The joint distribution of financial asset returns and the macroeconomic variables is modelled
using a VAR with a multivariate GARCH (M-GARCH) error structure. As a result, the portfolio
frontier is time varying and subject to contagion from the macroeconomic variable. Optimal asset
allocation requires that this be taken into account. We illustrate how to do this using three risky UK
assets and inflation as a macroeconomic factor. Taking account of inflation generates portfolio frontiers
that lie closer to the origin and offers investors superior risk–return combinations.
| Item Type: | Article |
|---|---|
| Keywords: | Asset allocation; Macroeconomic effects; Multivariate GARCH; |
| Academic Unit: | Faculty of Social Sciences > Economics, Finance and Accounting |
| Item ID: | 8016 |
| Identification Number: | 10.1016/S1058-3300(02)00072-1 |
| Depositing User: | Thomas Flavin |
| Date Deposited: | 08 Mar 2017 17:25 |
| Journal or Publication Title: | Review of Financial Economics |
| Publisher: | Elsevier |
| Refereed: | Yes |
| Related URLs: | |
| URI: | https://mural.maynoothuniversity.ie/id/eprint/8016 |
| Use Licence: | This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here |
Repository Staff Only (login required)
- Item control page
Downloads
Downloads per month over past year
