Date of Award
Daniels College of Business
Portfolio optimization, Stock-bond correlation, Tactical asset allocation, Time-varying Granger-causality, Wavelet coherence
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.
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Received from ProQuest
Williams, T.H., "Tactical Allocation Through the Lens of Correlational Time-Variance, Determinants, and Regimes" (2023). Electronic Theses and Dissertations. 2235.
Available for download on Thursday, August 01, 2024