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Institutional Investors Active Asset Allocation Decision-making Research

Posted on:2004-11-02Degree:DoctorType:Dissertation
Country:ChinaCandidate:M Q ZhengFull Text:PDF
GTID:1116360095462776Subject:Finance
Abstract/Summary:PDF Full Text Request
In this thesis, a thorough and comprehensive research is made on the asset allocation problem faced by most institutional investors.Asset allocation holds a significant position in the modern investment decisions. The necessity and feasibility of asset allocation and how to employ asset allocation scientifically and efficiently is at the frontier of theory and practice of modern security investment. Many difficulties still lie in the comprehensive research in this field, but such a research is of great significance in both theory and practice This thesis is the one of the production of the active research the author made regarding this problem.The author found that a complete scientific system and practical framework of active asset allocation should be comprised of: the necessity and feasibility of active asset allocation, the multiple-layer structure of asset allocation (the strategic asset allocation and the tactical asset allocation), the foundation for active asset allocation decisions, the techniques in active asset allocation, and the risk immunition of asset allocation decisions.The author draws the conclusion that it is in the market incompleteness where the necessity of active asset allocation lies, while the existence of tardy information makes up the feasibility of active asset allocation for institutional investors.As to the foundation for strategic asset allocation, the author holds the view that the unfolding of business cycle should be the theoretical foundation and starting point of asset allocation for institutional investors. The unfolding of business cycles determines the changes in the relative return of stocks, bond and cash asset. Institutional investors can employ the business cycle approach or strengthened business cycle approach to recognize and monitor the business cycle. Institutional investors should employ different asset allocation strategy at different stages of the business cycle.In regards to techniques employed in active asset allocation, the author found that models applied in asset allocation can be divided into the optimal mean-variance model and risk averse asset allocation model, according to their different risk levels, and they can also be divided into linear asset allocation model and non-linear asset allocation model according to whether the asset return follows a normal distribution.The dynamic asset allocation model under the downside-risk-averse framework is more reasonable and scientific and thus is more applicable in practice.In research on the style allocation to stock asset, the author concludes that the style allocation is an unneglectable part in the whole asset allocation decision of institutional investors. The scientific definition and classification is the foundation for style allocation. The most commonly used methods of style allocation are allocation between value stock and growth stock and the allocation among fund manager of different styles. The style allocation technique adopted in the style- timing model.When discussing the allocation among sectors, the author makes the point that the recognition of business cycle is the foundation and starting point of asset allocation among sectors. The premise for asset allocation among sectors should be: study the relative performance of each sectors at different stages of business cycle according to differences in sensitivity to GDP and interest rate of different sectors in the economy. Institutional investors should employ different cross-sector allocation at different stages of the business cycle.With regards to allocation of bond asset, the author points our that active bond asset allocation strategies include: strengthened index and minor risk unmatched strategy, active managing and major risk unmatched strategy and complete active strategy. The methods to achieve the optimal allocation of fixed income securities include the target-penalty method and mean- variance method. The global bond asset allocation includes allocation among markets, allocation among currencies and alloc...
Keywords/Search Tags:Security Investment, Asset Allocation
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