Evaluating the influence of macroeconomic variables and uncertainty indices on optimal asset allocation
| dc.contributor.advisor | Bautista, Maria Socorro G. | |
| dc.contributor.author | Alipio, John Michael C. | |
| dc.date.accessioned | 2024-11-15T07:23:16Z | |
| dc.date.available | 2024-11-15T07:23:16Z | |
| dc.date.issued | 2022-01 | |
| dc.description.abstract | This paper shows how macroeconomic information can be used to improve asset allocation by introducing the Modified Single Index Model (MSIM), a portfolio optimization process which incorporates macroeconomic variables through sectoral quantile regression to explain the common movement of stocks and use them as potential indices to generate portfolio allocations. Given the situation where the Philippine stock return data exhibit skewness and kurtosis deviating from normality, in which thick tails and sharp peaks exist, this optimization process uses Quantile Regression (QR) to capture the multifaceted dependence between the macroeconomic variables and stock returns. Empirical results suggest that there is an asymmetric relationship between the variables and the reaction of the market to macroeconomic fluctuations is highly heterogeneous across the conditional distribution of the stock returns. Further, this method does not impose the a priori restriction that all sectors behave similarly to macroeconomic fluctuations, as is implicitly assumed in much of the existing literature that examines composite market returns. The results suggest that there are potential disparities in the effects of macroeconomic variables on sectoral stock returns. With the evidence of varying performance of different sectors under the same economic conditions, this study points to the possibility of creating portfolio allocations with superior returns relative to the Markowitz' optimization model and the composite market index model. | |
| dc.identifier.uri | https://selib.upd.edu.ph/etdir/handle/123456789/1551 | |
| dc.language.iso | en | |
| dc.subject | Macroeconomic variables | |
| dc.subject | Asset allocation | |
| dc.subject | Stocks | |
| dc.subject | Market | |
| dc.subject | Portfolio | |
| dc.title | Evaluating the influence of macroeconomic variables and uncertainty indices on optimal asset allocation | |
| dc.type | Thesis |