Date of Award

2023

Document Type

Dissertation

Degree Name

Ph.D.

Organizational Unit

Daniels College of Business

First Advisor

Jack Strauss

Second Advisor

Alex Petkevich

Third Advisor

Chris Hughen

Keywords

Portfolio optimization, Stock-bond correlation, Tactical asset allocation, Time-varying Granger-causality, Wavelet coherence

Abstract

We investigate correlations among six primary asset classes from January 1982 to December 2022. Our analysis extends existing literature, on the well-researched stock-bond correlation (SBC), by encompassing 14 supplementary asset class dyads and four correlational regimes. We challenge the archetype of correlational time-invariance that underlies buy-and-hold asset allocation strategies by implementing structural break tests and an innovative Wavelet Coherence (WC) methodology, where our findings reveal temporal instability. Through a multi-method statistical approach, we present robust and persuasive evidence of macroeconomic factors as determinants of temporal change. Leveraging time-varying Granger causality, we unearth elusive yet significant relationships. Our research pivots to practice, illustrating outperformance in portfolios constructed upon the principles of time-varying change, macro drivers, and correlational regimes, thus enabling investors to make more informed decisions, leading to superior risk-adjusted returns amid a dynamically evolving economic landscape.

Publication Statement

Copyright is held by the author. User is responsible for all copyright compliance.

Rights Holder

T.H. Williams

Provenance

Received from ProQuest

File Format

application/pdf

Language

en

File Size

135 pgs

Discipline

Finance

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