Asset allocation with recursive parameter updating and macroeconomic regime identifiers

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Bibliographic Details
Authors and Corporations:	Goodarzi, Milad (Author), Meinerding, Christoph (Author)
Other Authors:	Meinerding, Christoph 1982- [Author]
Edition:	December 12, 2022
Type of Resource:	E-Book
Language:	English
published:	Frankfurt am Main Deutsche Bundesbank [2023]
Series:	Deutsche Bundesbank: Discussion paper ; no 2023, 06
Subjects:	Regime switching models asset allocation macro-based portfolio strategies parameter updating Graue Literatur
Source:	Verbunddaten SWB Lizenzfreie Online-Ressourcen
ISBN:	9783957299376

Description
Summary:	This article studies long-horizon dynamic asset allocation strategies with recursive parameter updating. The parameter estimates for the regime-switching dynamics vary as more and more datapoints are observed and the sample size increases. In such a setting, the globally optimal portfolio strategy cannot be determined due to computational complexity. Among a set of suboptimal strategies, the portfolio performance can be improved substantially if the dynamics of the regimes are estimated from fundamental macroeconomic instead of financial return data. Especially after highly uncertain times, the estimation based on financial market data identifies extreme regimes, leading to extreme hedging demands against regime changes.
Physical Description:	1 Online-Ressource (circa 40 Seiten); Illustrationen
ISBN:	9783957299376