An Empirical Analysis Of Common Asset Allocation Methods In China

With the improvement of people’s living standard, national wealth is growing rapidly and the wealth management market expands rapidly in China. China’s demand for wealth management will become more and more intense. At the same time, the national economic innovation is promoted constantly and the selection of investment products continues to increase. People will no longer be satisfied with their own money in the bank for a long time with a lower interest. Asset allocation requirements significantly increased.Asset allocation refers to according to the investors’ appetite for risk and investment objectives, with the predetermined or real-time allocation of funds in a variety of ways, funds are allocated in different kinds of assets (such as stocks, bonds, commodities, real estate, cash, etc.) so as to obtain ideal income and achieve a certain degree of risk diversification.This article constructed an asset pool including 10 sectors indices,3 bond indices and 14 commodity futures. The article introduces and studies four common methods of asset allocation (Equal Weight Allocation Method, Mean Variance Asset Allocation Method, Volatility Parity Asset Allocation Method and Risk Parity Asset Allocation Method) and tries to find out the applicability of these methods in our financial market.The study found that Equal Weight Allocation Method is in a good performance, especially in the stock market rose sharply. The stability of the Mean Variance Asset Allocation Method is poor. Weights of different asset classes are too concentrated and volatile. Performance of Volatility Parity Asset Allocation Method is overall good, but too much weight is allocated to bond assets. Risk Parity Asset Allocation Method has a low volatility and high return-volatility ratio than others. Its overall performance is relatively stable and the risk contribution of each asset is relatively stable.