Dr Zhichao Zhang zhichao.zhang@durham.ac.uk
Assistant Professor
Strategic asset allocation by mixing shrinkage, vine copula and market equilibrium
Zhang, F.; Zhang, Z.
Authors
Dr Zhichao Zhang zhichao.zhang@durham.ac.uk
Assistant Professor
Abstract
We propose a new portfolio optimization method combining the merits of the shrinkage estimation, vine copula structure, and Black–Litterman model. It is useful for many investors to satisfy simultaneously the three investment objectives: estimation sensitivity, asymmetric risks appreciation, and portfolio stability. A typical investor with such objectives is a sovereign wealth fund (SWF). We use China's SWF as an example to empirically test the method based on a 15-asset strategic asset allocation problem. Robustness tests using subsamples not only show the method's overall effectiveness but also manifest that the function of each component is as expected.
Citation
Zhang, F., & Zhang, Z. (2018). Strategic asset allocation by mixing shrinkage, vine copula and market equilibrium. Journal of Forecasting, 37(3), 340-351. https://doi.org/10.1002/for.2506
Journal Article Type | Article |
---|---|
Acceptance Date | Nov 16, 2017 |
Online Publication Date | Jan 3, 2018 |
Publication Date | Apr 1, 2018 |
Deposit Date | Nov 17, 2017 |
Publicly Available Date | Jan 3, 2020 |
Journal | Journal of Forecasting |
Print ISSN | 0277-6693 |
Electronic ISSN | 1099-131X |
Publisher | Wiley |
Peer Reviewed | Peer Reviewed |
Volume | 37 |
Issue | 3 |
Pages | 340-351 |
DOI | https://doi.org/10.1002/for.2506 |
Public URL | https://durham-repository.worktribe.com/output/1343594 |
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Copyright Statement
This is the accepted version of the following article: Zhang, F. & Zhang, Z. (2018). Strategic asset allocation by mixing shrinkage, vine copula and market equilibrium. Journal of Forecasting, which has been published in final form at https://doi.org/10.1002/for.2506. This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.
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