Time-Variability in Higher Moments Is Important for Asset Allocation

Détails

ID Serval
serval:BIB_0F74294BD91E
Type
Rapport: document publié par une institution, habituellement élément d'une série.
Sous-type
Working paper: document de travail dans lequel l'auteur présente les résultats de ses travaux de recherche. Les working papers ont pour but de stimuler les discussions scientifiques avec les milieux intéressés et servent de base pour la publication d'articles dans des revues spécialisées.
Collection
Publications
Institution
Titre
Time-Variability in Higher Moments Is Important for Asset Allocation
Auteur(s)
Jondeau E., Rockinger M.
Détails de l'institution
Swiss Finance Institute
Date de publication
11/2006
Numéro
06-35
Genre
Research Paper
Langue
anglais
Notes
New version: October 2008
Résumé
It is well known that strategies that allow investors to allocate their wealth using return and volatility forecasts, the use of which are termed market and volatility timing, are of significant value. In this paper, we show that distribution timing, defined here as the ability to use forecasts for moments up to the fourth one, yields significant incremental economic value. By considering the weekly asset allocation among the five largest international stock markets, we find that distribution timing yields a gain of around 140 basis points per year over the last decade. To control for the parameter uncertainty of the model, we cast the model into a Bayesian setting. We also consider alternative preference structures and model specifications. In all cases, the value of distribution timing remains economically significant.

Mots-clé
Bayesian estimation, distribution timing, GARCH model, nonnormality, parameter uncertainty, Portfolio allocation, volatility timing
Création de la notice
03/05/2010 13:31
Dernière modification de la notice
20/08/2019 13:36
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