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Research On Adjusting Merrill Clock Based On RBC Theory

Posted on:2018-01-05Degree:MasterType:Thesis
Country:ChinaCandidate:L H ZhangFull Text:PDF
GTID:2359330515482745Subject:Finance
Abstract/Summary:PDF Full Text Request
Merrill Lynch published a study entitled "The Investment Clock,Special Report #1: Making Money from Macro " in 10 November 2004 for the first time to elaborate the Merrill Lynch Investment Clock Theory.The report selected the US output gap estimates and the annual consumer price index as an indicator of the economic cycle using the datum of the United States from July 1969 to August 2003.The Report divided macro trend into several complete cycle,each cycle consists of four stages: recovery,overheat,reflation and recession.Each stage in turn rolling,form 4-6 economic cycle.After the verification of nearly 35 years of bond,stock,commodity and cash returns derived from different economic stages,the report suggests that investors should be configured to different types of assets in order to exceed the market to earn excess capital return.The report give the further study in the area of different stages should be configured so that investors can deploy what kind of industry assets.The thinking of Merrill Clock is clear,the framework of it is complete.So the clock,significant to ordinary investors,allowing ordinary investors to identify the business cycle and then derive a portfolio of optimal assets to maximize revenue in the case of equal risk or minimize risk in the case of equal returns.According to Merrill Lynch Investment clock guidance,we select Chinese industrial added value year-on-year growth trend data and CPI as the 2D data partition China economic cycle into four stages.Then we calculate the rate of the return of four types of asset in four stages,found that only two class in practice diagonal table accordance with the theory.Next,we recognized that the rate of return of each assets are free from statistically significant difference in four stages we just partition based on the theory of the clock.Empirical tests show that Merrill Lynch clock failure in China as a "bad clock".According to the guidance of the real business cycle(RBC)theory,we choose the capacity utilization as the only indicator of the economic cycle.The method of measuring the capacity utilization of American economist Shaikh and Moudud is referenced and improved,and the volatility of Chinaís capacity utilization is obtained by using the data of capital stock and industrial output value.We used the method of the National Bureau of Economic Research(NBER)for partition economic cycle(data from April 1998 to December 2016)into two cycles,each cycle corresponding to the boom and recession stage.Through the calculation of each stage of the four asset yields,we found that four types of assets respectively have significant differences in booms and recession: recession,investors should be guided to allocate bonds and cash;boom,commodities and equities.Thus adjust Merrill clock,give ordinary investors suggestion.
Keywords/Search Tags:Merrill Lynch investment clock, business cycle, asset allocation, return on assets, real business cycle theory, capacity utilization
PDF Full Text Request
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