An Investment Model via Regime Switching Economic Indicators
讲座名称：
An Investment Model via Regime Switching Economic Indicators
讲座时间：
2011-11-04
讲座人：
Yonggan Zhao
形式：
校区：
兴庆校区
实践学分：
讲座内容：
Title: An Investment Model via Regime Switching Economic Indicators
时间：11月4日 （周五） 上午9点
地点：管理学院224教室
讲座人：Prof. Yonggan Zhao Dalhousie University, Canada
Abstract: The Internet bubble and 2008-2009 economic crash exposed severe limitations of traditional portfolio models, especially the dependence on a static framework-e.g. a constant covariance matrix. This paper develops a novel dynamic optimization model for constructing a long-short equity portfolio. A hidden Markov model captures the critical market sentiments, with expected asset returns highly dependent on the associated economic regimes. Expected equity returns are characterized by a set of eight economic factors within a regime-switching auto-regressive approach. In the empirical analysis, we employ exchange traded funds to test the approach. Common factors include: changes in S\&P 500 price index, changes in Treasury bond yields, changes in U.S. dollar index, changes in implied volatility, Changes in aggregate dividend yield, short term interest rate, Changes in treasury yield spread, and Changes in credit spread. The optimal portfolio is subject to the various policy constraints on leverage and individual positions. The portfolio exposure to each of the risk factors is controlled by the level of risk aversion. The sample tests show that the investment portfolio provides much higher returns with very limited risk, in contrast with equity indices, for the period of January 1999 to October 2010.
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