Asset allocation under regimes in European economies
Sebastien Berujon et al.
What the paper says
The study investigates a dynamic asset allocation strategy in a regime-switching economy. We applied the analytical solution proposed by Campani et al. (2021), i.e., the CGL model, updating its optimisation procedure with a multi-start constrained estimation method. We identified four regimes with a portfolio formed from main European stock market indices. Then, we performed an accuracy assessment, which indicated that the model provided adequate closed-form solutions to maximise the investor's stochastic differential utility. Finally, we analysed the performance of the CGL model for different leverage levels and rebalancing policies, in an out-of-sample exercise. The results demonstrated that the CGL portfolios offer superior return-to-risk ratios than the benchmarks, and outperform their certainty equivalent returns with statistical significance.
Evidence weight
Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40
| F · citation impact | 0.00 × 0.4 = 0.00 |
| M · momentum | 0.50 × 0.15 = 0.07 |
| V · venue signal | 0.50 × 0.05 = 0.03 |
| R · text relevance † | 0.50 × 0.4 = 0.20 |
† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.