An Empirical Study On The Law Of Asset Allocation In China 's Economic Cycle

Effective asset allocation holds a decisive position in financial market. With the development of economy and the progress of society, Chinese residents’ financial consciousness gradually strengthens, and they have transformed from the savers to investors. Under this background, research on asset allocation has played a very important role. However, any asset allocation issues are inseparable from the fundamental analysis, which is to say macroeconomic environment.In this paper, the economic cycle will be introduced to the asset allocation process. According to the existing theoretical and empirical research, Chinese Warning Index is selected from a number of economic indicators as the basis of dividing the economic cycle. The result shows that Chinese economic cycle is divided into three regimes, namely stable economy regime, moderate growth regime and rapid growth regime.Then, the regime will be introduced to the largest categories of assets allocation by dummy variables. Considering the Chinese actual economic situation, this paper selects the SHSE-SZSE 300 Index, CSI 500 Index, SSE Government Bond Index, SSE Corporate Bond Index, the China Commodity Price Index as the dependent variable, and nine indicators of Chinese Warning Index as independent variables to establish a D-GARCH Model.(It does not contain Per Capita Disposable Income, because monthly data are unavailable.) As a result, the optimal categories asset allocation can be got from comparing the change of influence coefficient.What’s more, the regime will also be introduced to the Black-Litterman model by given different confidence level, which has given by MS-AR Model’s regime transition probability matrix. Taken SHSE-SZSE 300 Sector Index as an example, optimal industry asset allocation could be obtained from the research of the change of rate of return in the different regimes.Finally, the problem of “top-down” asset allocation is solved under the Chinese economic cycle.