On the Importance of Time Variability in Higher Moments for Asset Allocation

Détails

ID Serval
serval:BIB_B3406FAB48D6
Type
Article: article d'un périodique ou d'un magazine.
Collection
Publications
Institution
Titre
On the Importance of Time Variability in Higher Moments for Asset Allocation
Périodique
Journal of Financial Econometrics
Auteur(s)
Jondeau E., Rockinger M.
ISSN
1479-8409
Statut éditorial
Publié
Date de publication
2012
Peer-reviewed
Oui
Volume
10
Numéro
1
Pages
84-123
Langue
anglais
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
ayesian estimation, distribution timing, GARCH model, nonnormality, parameter uncertainty, Portfolio allocation, volatility timing
Web of science
Création de la notice
10/12/2012 16:57
Dernière modification de la notice
20/08/2019 15:21
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