The Research On Asset Allocation Based On Economic Cycle

With the increase of people’s disposable income and the improvement of financial management concepts,the need for scientific investment methods becomes more and more prominent,asset allocation theory gradually become a hot topic in academic research.In order to better expand the theory of asset allocation,it is necessary to understand and analyze the impact of macroeconomic fundamentals on asset returns,which are intuitively influenced by economic cycles.At present,the economic cycle and asset allocation to link the more universal asset allocation theory when the Merrill Lynch clock theory was introduced in 2004.The theory is based on the 1973-2003 U.S.financial markets,the OECD output gap estimates and CPI inflation data were divided into four stages of the economy,with data to prove the effectiveness of the allocation of different categories of asset classes in different economic stages strategy.Since the development of China’s financial market,investors can choose from a wide variety of financial products,and they also show the characteristics of capital rotation among different types of assets.In the context of the current era,is the Merrill Lynch theory effectively applicable to the Chinese market? China’s major asset class return performance with the economic cycle fluctuations show what regular features? Can this theory guide investors to dynamically adjust asset portfolios to obtain excess returns according to different economic stages? This is the research idea and significance of this paper.After studying the theory of economic cycle and asset allocation,this paper draws on the research method of Merrill Lynch clock theory,and integrates the two dimensions of economic growth and inflation to classify the historical stages of China from 2007 to 2021,which are recovery stage,overheating stage,stagflation stage and recession stage.For the dimension of economic growth,this paper does not simply substitute the real GDP growth rate or industrial value added,but uses the HP filter method to calculate the output gap as a characterization variable on the basis of excluding the impact of prices on current price GDP,which greatly restores the theoretical thinking of the Merrill Lynch clock strategy.Based on the calculated output gap data in my country and the year-over-year growth rate of CPI,using cointegration regression and other methods,he performance of China’s major asset class returns at different stages of the economic cycle was studied.The results show that the rotation performance of China’s large asset class returns at different stages of the economic cycle does not fully comply with the traditional Merrill Lynch clock theory.Specifically: China’s economic cycle part of the time in accordance with the recovery,overheating,stagflation,recession four stages in turn,after 2015 repeatedly performed in the overheating and stagflation between frequent changes;macroeconomic cycle on China’s major asset class return impact on the statistical results are significant,including in the recovery and overheating phase,the best performance of equity asset returns;in the stagflation and recession phase,the performance of bond assets is the most The portfolio guided by the investment clock theory significantly improves the investment return,indicating the validity of Merrill Lynch’s investment theory in China’s market.For the performance of China’s major asset classes and the differences in the conclusions of the Merrill Lynch clock theory,this paper in the United States and China’s average portfolio returns in different economic stages on the basis of comparison,respectively,from the development of China’s financial markets themselves,China’s investors’ investment psychology and economic globalization for commodities and other assets,such as the impact of the analysis and exploration.In addition,based on the actual situation in China,the impact of government regulation on the economic cycle and the returns of major assets should also be considered.By incorporating the element of monetary liquidity into the study and analyzing the impact of monetary policy on broad asset class returns at different stages of the economic cycle,this paper optimizes the traditional Merrill Lynch clock model;the annualized return of the optimized rotation strategy has increased significantly after being tested by historical data.