Liquidity regimes and optimal dynamic asset allocation

• 成果类型: Article
• 署名作者: Collin-Dufresne, Pierre; Daniel, Kent; Saglam, Mehmet
• 署名单位: Swiss Federal Institutes of Technology Domain; Ecole Polytechnique Federale de Lausanne; Swiss Finance Institute (SFI); Columbia University; National Bureau of Economic Research; University System of Ohio; University of Cincinnati
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2019.09.011
• 发表日期: 2020
• 页码: 379-406
• 关键词: portfolio choice; Dynamic models; transaction costs; stochastic volatility; Price impact; Risk-parity; MEAN-VARIANCE

摘要

We solve a portfolio choice problem when expected returns, covariances, and trading costs follow a regime-switching model. The optimal policy trades towards an aim portfolio given by a weighted-average of the conditional mean-variance-efficient portfolios in all future states. The trading speed is higher in more persistent, riskier, and higher-liquidity states. It can be optimal to overweight low Sharpe-ratio assets such as Treasury bonds because they remain liquid even in crisis states. We illustrate our methodology by constructing an optimal US equity market timing portfolio based on an estimated regime-switching model and on trading costs estimated using a large-order institutional trading data set. (C) 2019 Elsevier B.V. All rights reserved.