Empirical Research On Asset Allocation Based On Investment Clock Theory

With the growth of household wealth and awareness of financial management,individual investor faces two problems:to judge economic situation and allocate corresponding asset.The current solution is the investment clock theory,which divides the economy into four scenarios based on the rising and falling trend of output gap and inflation.This paper studies the effectiveness of economic situation and asset allocation under the guidance of investment clock.The aim is to refine the empirical findings into investment and policy recommendations.By combining theoretical analysis with empirical research,this paper,on the basis of literature review,investigates the earnings performance of four assets of bond funds,stocks,financial products and commodities from 2001 to 2017.First,output gap data is measured by HP filtering.Secondly,the theoretical analysis method is used to optimize the four asset return indicators:to measure bond returns by the cumulative net value of bond funds;Stock returns are measured by the sum of the csi 500 index*50%+ csi 300 index*50%.Commodities earnings are measured by the south China composite index;The expected annual rate of return of financial products of bank of China is used to measure cash assets.Thirdly,descriptive statistics,unit root test,co-integration test and regression analysis were used to study the relationship between asset returns and economic situation.Finally,the average return of four assets in four economic situations is examined to verify the profitability of asset allocation recommendations.This paper makes three research innovations:1.It proposes the "investment clock research paradigm"--analyzing the effectiveness of output gap and four asset return indicators of bonds,stocks,cash and commodities.2.It is proved that the actual output or industrial added value cannot be used to identify the economic situation instead of the output gap.3.Analyze the causes of the stagflation situation from the unique perspective of two currency creation methods,and put forward policy Suggestions to improve the potential growth rate.The research results show that:1.The investment clock still has the effectiveness of guiding investors to study the economic situation and allocate the asset profit.2.The stimulus package at the end of 2008 created an 18-month period of stagflation.Based on the three empirical research conclusions of measurement test,average return comparison test and investment clock diagonal test,the investment Suggestions are proposed:1.Investment in bonds in recession situation,avoid investment in stocks,avoid buying spot commodities or long commodity futures.2.The recovery situation can be invested in stocks,which can be traded in commodities or futures,so as to avoid staying in bank financial accounts.3.Avoid investing in stocks in a stagflation situation and allocate cash assets.Policy recommendations for increasing potential growth:1.Development of ne-w trading partners in the sino-american trade war.2.Increase population growth.3.Strengthen human capital.4.Adjust real estate laws and cooperate with innovative financial products to implement inclusive finance.Research Suggestions:1.Use the new measurement method to obtain output gap;2.Avoid using real output or industrial value added to identify economic situations instead of output gaps.