Tactical Allocation Through the Lens of Correlational Time-Variance, Determinants, and Regimes

<p>We investigate correlations among six primary asset classes from January 1982 to December 2022. Our analysis extends existing literature, on the well-researched stock-bond correlation (SBC), by encompassing 14 supplementary asset class dyads and four correlational regimes. We challenge the archetype of correlational time-invariance that underlies buy-and-hold asset allocation strategies by implementing structural break tests and an innovative Wavelet Coherence (WC) methodology, where our findings reveal temporal instability. Through a multi-method statistical approach, we present robust and persuasive evidence of macroeconomic factors as determinants of temporal change. Leveraging time-varying Granger causality, we unearth elusive yet significant relationships. Our research pivots to practice, illustrating outperformance in portfolios constructed upon the principles of time-varying change, macro drivers, and correlational regimes, thus enabling investors to make more informed decisions, leading to superior risk-adjusted returns amid a dynamically evolving economic landscape.</p>

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

Dissertation

Year dc:date.available

2023

Author dc:creator

• Williams, T.H.

Contributors dc:contributor

• Jack Strauss
• Alex Petkevich
• Chris Hughen

• Portfolio optimization
• Stock-bond correlation
• Tactical asset allocation
• Time-varying Granger-causality
• Wavelet coherence
• Business
• Corporate Finance
• Finance and Financial Management

Statement dc:rights

• <p>Copyright is held by the author. User is responsible for all copyright compliance.</p>

Language dc:language

en

Repository record dc:identifier

https://digitalcommons.du.edu/etd/2235

OAI identifier oai:identifier

oai:digitalcommons.du.edu:etd-3221