Does History Repeat Itself? Business Cycle and Industry Returns

Chava, Sudheer; Hsu, Alex; Zeng, Linghang

doi:10.2139/ssrn.2803585

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2020

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“…("bear") to 0.5 and 0.1, respectively. Then the optimal portfolio proportions given in (4), (5), and ( 6) are (π M t ) * /x = 45.4%, (π A t ) * /x = 23.3%, (π B t ) * /x = 75.7%.…”

Section: Quantitative Analysismentioning

confidence: 99%

Industry portfolio allocation with asymmetric correlations

Kim

Park

Yoon

2020

The European Journal of Finance

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We develop a new framework of optimal consumption and portfolio choice at industry portfolio level under dynamic and asymmetric correlations between industry and market portfolios. We derive in closed-form the optimal consumption and investment strategies under regime-dependent correlations environment. Overall, we find that ignoring timevarying and asymmetric correlations between portfolios can be costly to investors when applied to a construction of the optimal portfolio. Finally, we empirically test the performance of the model-based investment strategy.

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“…("bear") to 0.5 and 0.1, respectively. Then the optimal portfolio proportions given in (4), (5), and ( 6) are (π M t ) * /x = 45.4%, (π A t ) * /x = 23.3%, (π B t ) * /x = 75.7%.…”

Section: Quantitative Analysismentioning

confidence: 99%