Research On The Asset Allocation Based On The Investment Clock

Along with the steady development of China’s economy and the increasing of Chineseincome, demand for the preservation and the appreciation of idle funds of the society isadvancing. Meanwhile, with the growing prosperity of China’s financial markets, investmentproducts and investment holdings of investors become more diversified. Large institutionalinvestors such as banks, securities companies, funds and trusts regard asset allocation and itsadaptability to the situation of the economic development as an important factor to their owndevelopment. How to grasp the macroeconomic volatility, improve the rationality of the assetallocation and benefit from that are becoming a significant problem for investment institutionsand investors. Thus, basing on Merrill Lynch’s investment clock, this research try to get theinvestment clock which is suitable to Chinese market to guide investors in the asset allocationin different business cycle environments.In this paper, a summary of previous studies on the business cycle and asset allocation ismade firstly. Then the rationality of the using of investment clock under the environment ofChina’s economy is explained. After that, by analyzing the trend in the economy of ourcountry since1994, the economic cycle has been divided into different stages and the profitsof categories of assets are calculated at those different stages. Finally, making a comparativeanalysis between Merrill Lynch’s investment clock and the investment clock in China, theinvestment clock is refined and improved for Chinese investors.The thesis consists of five chapters. Chapter1mainly introduces background, meaningand the related research. Chapter2moves to study how to sort the assets, making a summaryof Merrill Lynch’s investment clock, foreshadowing later study. Chapter3explores theinvestment clock in China’s economy. By dividing the economic cycle into different stages,calculating the profits of categories of assets at different stages, differences between MerrillLynch’s investment clock and the investment clock in China are demonstrated. Chapter4modifies investment clock and makes suggestions for Chinese investors.