Timing Idiosyncratic Volatility and Dynamic Asset Allocation

Dynamic Asset Allocation under Stochastic Volatility - Theory and Practice

This study develops inter-temporal dynamic asset allocation with stochastic volatility (DAASV) models. The DAASV models integrate the stochastic volatility feature inherent in asset returns into the allocation procedure. By applying the DAASV, an investor can more efficiently diversify the unsystematic risks, so as to achieve better performance. We demonstrate that the DAASV models dominate the...

Asset Allocation Models and Market Volatility

While asset allocation and risk management models all assume at least short-term stability of the covariance structure of asset returns, actual covariance and correlation relationships vary wildly, even over short horizons. Moreover, correlations increase in volatile periods, reducing the power of diversification when it might most be desired. We attempt to explain these phenomena and to presen...

Idiosyncratic Volatility and the Timing of Corporate Insider Trading

This paper addresses the question of how the timing of corporate insider trading is related to the level of information asymmetry in a stock price. Our empirical analysis shows that, when buying their firm’s shares, corporate insiders are likely to exploit their informational advantage through trading at times of high information asymmetry, while their selling appears more cautious because of r...

Dynamic asset allocation techniques

Investment strategy is often static, punctuated by infrequent reviews. For most long-term investors, this practice results in large risks being taken that could otherwise be managed with a more dynamic investment policy. The bulk of this paper is aimed at analysing and describing two multi-period investment strategy problems – in order to derive potential dynamic strategies. Along the way, we s...

Dynamic Asset Allocation ∗ Claus