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Portfolio allocation in transition economies

Abstract : Designing an investment strategy in transition economies is a difficult task because stock-markets opened through time, time series are short, and there is little guidance how to obtain expected returns and covariance matrices necessary for mean-variance portfolio allocation. Also, structural breaks are likely to occur. We develop an ad-hoc investment strategy with a flavor of Bayesian learning. An observation is that often an extreme event will herald a new state of the economy. We use this observation to re-initialize learning when unlikely returns materialize. By using a Cornell benchmark, we are able to show the usefulness of our strategy for certain types of re-initializations.
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https://hal-hec.archives-ouvertes.fr/hal-00601482
Contributor : Antoine Haldemann Connect in order to contact the contributor
Submitted on : Friday, June 17, 2011 - 6:53:36 PM
Last modification on : Thursday, January 11, 2018 - 6:19:31 AM

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  • HAL Id : hal-00601482, version 1

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Michael Rockinger, Eric Jondeau. Portfolio allocation in transition economies. 2001. ⟨hal-00601482⟩

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