The Effectiveness Test,Improvement,and Prediction On Merrill Clock For Chinese Asset Allocation

As a traditional asset allocation method,Merrill clock was proposed by Merrill Lynch in 2004 and has been in use ever since.Its asset allocation and industry configuration rule based on the economic cycle has been accepted by most people,and it has been proved to be effective in the US market.With the domestic economic growth slow down,the risks and benefits of assets tend to be equal.It is no longer possible to achieve higher returns with low risks by investing in a single kind of asset.Asset allocation methods show its application value.At the same time,Merrill Lynch clock,one of the important methods for the asset allocation,has also received increasing attention,but its performance in China is still worth exploring.This article aims to test the effectiveness of Merrill Lynch's asset allocation in China,and to improve and predict it.This paper selects stocks,bonds,bulk commodities and cash as allocation assets,and selects the monthly industrial added value and CPI data for the period from June 2006 to June 2017 as the dividing indicators.Then we divide the economic status of the Merrill clock,and calculate the historical rate of return and the volatility of assets.By comparing with the performance of Merrill Lynch's theory of various types of assets,it is concluded that during the recession and recovery period,the performance of all kinds of assets conforms to the prediction of Merrill Lynch clock,while during the period of overheating and stagflation,the performance falls short of expectation and does not conform to the law of Merrill Lynch clock.According to the correlation coefficient of various types of assets in different stages,it is found that the correlation between various types of assets in the overheating,stagflation and recovery stages of Merrill Lynch clock is low and the division is effective.However,in the recession phase,the correlation coefficient of various assets is relatively high and the division is invalid.Therefore,it is necessary to further improve the traditional Merrill Lynch clock.The author uses the Regime-based analysis framework to define the economic status,and uses PMI&CPI,quarterly monetary investment & industrial added value,gram strong index &PPI: all industrial products,these three kinds of dividing indexes to divide the economy of our country.At the same time,the introduction of foreign exchange,an important category of assets,into the consideration of asset allocation,and the use of similar methods to study the performance and correlation of various types of assets at each self-defined stage,resulting in the use of PMI&CPI,gram strong index &PPI: all industrial products,due to the high correlation of various types of assets,the division is invalid.The correlation between quarterly monetary input and industrial added value is relatively low and the division is effective,so it is used as an optimization and improvement model.Finally,the risks and returns of all kinds of assets under Merrill Lynch Clock andits improved model are predicted.Finally,the final proportion of all kinds of asset allocation is predicted according to the mean-variance model and the risk parity model.It is concluded that the improved model can obtain higher returns with lower risks than the traditional Merrill Lynch Clock model.It provides a reference for the actual allocation of large categories of assets.