Economic implications of bull and bear regimes in UK stock and bond returns

• 成果类型: Article
• 署名作者: Guidolin, M; Timmermann, A
• 署名单位: University of Virginia; University of California System; University of California San Diego
• 刊物名称: ECONOMIC JOURNAL
• ISSN/ISSBN: 0013-0133
• DOI: 10.1111/j.1468-0297.2004.00962.x
• 发表日期: 2005
• 页码: 111-143
• 关键词: density forecasts; asset-allocation; portfolio; RISK; predictability; consumption; selection; CHOICE; rates; ratio

摘要

This paper presents evidence of persistent 'bull' and 'bear' regimes in UK stock and bond returns and considers their economic implications from the perspective of an investor's portfolio allocation. We find that the perceived state probability has a large effect on the optimal asset allocation, particularly at short investment horizons. If ignored, the presence of such regimes gives rise to substantial welfare costs. Parameter estimation uncertainty, while clearly important, does not overturn the conclusion that predictability in the return distribution linked to the presence of bull and bear states has a significant effect on investors' strategic asset allocation.