Portfolio insurance strategy - Markov switching model applied to asset allocation in Asia

• Main Authors: Chi-chuan Chen, 陳綺涓
• Other Authors: Wei-Che Tsai
• Format: Others
• Language: en_US
• Published: 2015
• Online Access: http://ndltd.ncl.edu.tw/handle/gqvfk9

碩士 === 國立中山大學 === 財務管理學系研究所 === 103 === The purpose of this paper is to use macroeconomic indicator and Markov switching model to distinguish different states of market and do dynamic asset allocation based on the transition between regimes to construct a regime-based portfolio. Subsequently, constant proportion portfolio insurance strategy is applied to the regime-based portfolio. Finally, we assume different scenarios to compare difference between these performances. We hope to find a strategy that can provide investors a sustained and stable performance. This study refers to Kritzman, Page, and Turkington (2012). We use stock indices and bonds of eight countries in Asia to form our portfolio in the estimation period from 2001 to 2014 on a quarterly basis. The empirical results show that the performance of a regime-based portfolio dynamically adjusted is better than EW, an equal weighted portfolio. In addition, regime-based portfolios perform relatively better than EW in the situation of not allowing selling short.