Asset allocation with a high dimensional latent factor stochastic volatility model

Review of Financial Studies

Volumn 19, Issue 1, 2006, Pages 237-271

  Han, Yufeng ^a,b  

^a TULANE UNIVERSITY   (United States)

^b TULANE UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 29344443074     PISSN: 08939454     EISSN: 14657368     Source Type: Journal    
DOI: 10.1093/rfs/hhj002     Document Type: Review

References (47)

1. Admati, A. R., S. Bhattacharya, P. Pfleiderer, and S. A. Ross, 1986, "On Timing and Selectivity," Journal of Finance, 41(3), 715-730.
2. Aguilar, O., and M. West, 2000, "Bayesian Dynamic Factor Models and Portfolio Allocation," Journal of Business and Economic Statistics, 18(3), 338-357.
3. Aït-Sahalia, Y., and M. W. Brandt, 2001, "Variable Selection for Portfolio Choice," Journal of Finance, 56, 1297-1351.
4. Avramov, D., 2002, "Stock Return Predictability and Model Uncertainty," Journal of Financial Economics, 64(3), 431-467.
5. Balduzzi, P., and A. W. Lynch, 1999, "Transaction Costs and Predictability: Some Utility Cost Calculations," Journal of Financial Economics, 52, 47-78.
6. Barberis, N., 2000, "Investing for the Long Run when Returns are Predictable," Journal of Finance, 55, 225-264.
7. Bhardwaj, R. K., and L. D. Brooks, 1992, "The January Anomaly: Effects of Low Share Price, Transaction Costs, and Bid-Ask Bias," Journal of Finance, 47(2), 553-575.
8. Bollerslev, T., 2001, "Financial Econometrics: Past Developments and Future Challenges," Journal of Econometrics, 100(1), 41-51.
9. Bollerslev, T., R. F. Engle, and D. B. Nelson, 1994, "ARCH Models," in R. F. Engle and D. McFadden (ed.), Handbook of Econometrics, Elsevier, North-Holland, Amsterdam, Vol. IV, pp. 2959-3038.
10. Chan, L. K. C., J. Karceski, and J. Lakonishok, 1999, "On Portfolio Optimization: Forecasting Covariances and Choosing the Risk Model," The Review of Financial Studies, 12(5), 937-974.
11. Chib, S., and E. Greenberg, 1996, "Markov Chain Monte Carlo Simulation Methods in Econometrics," Econometric Theory, 12, 409-431.
12. Chib, S., and E. Greenberg, 1998, "Analysis of Multivariate Probit Models," Biometrika, 85(2), 377-361.
13. Chib, S., F. Nardari, and N. Shephard, 2005, "Analysis of High Dimensional Multivariate Stochastic Volatility Models," Journal of Econometrics, forthcoming.
14. Copeland, M. M., and T. E. Copeland, 1999, "Market Timing: Style and Size Rotation using VIX," Financial Analysts Journal, 55, 73-81.
15. Cremers, M., 2002, "Stock Return Predictability: a Bayesian Model Selection Perspective," The Review of Financial Studies, 15(4), 1223-1250.
16. de Jong, P., and N. Shephard, 1995, "The Simulation Smoother for Time Series Models," Biometrika, 82(2), 339-350.
17. Ferson, W. E., S. Sarkissian, and T. Simin, 2002, "Spurious Regressions in Financial Economics," NBER Working Paper No. W914.
18. Fleming, J., C. Kirby, and B. Ostdiek, 2001, "The Economic Value of Volatility Timing," Journal of Finance, 56(1), 329-351.
19. Fleming, J., C. Kirby, and B. Ostdiek, 2003, "The Economic Value of Volatility Timing Using 'Realized' Volatility," Journal of Financial Economics, 67(3), 473-509.
20. Fleming, J., B. Ostdiek, and R. E. Whaley, 1996, "Trading Costs and The Relative Rates of Price Discovery in The Stock, Futures, and Option Markets," Journal of Futures Markets, 16, 353-387.
21. Forbes, K. J., and R. Rigobon, 2002, "No Contagion, Only Interdependence: Measuring Stock Market Co-movements," Journal of Finance, 57(5), 2223-2261.
22. Geweke, J., and G. Zhou, 1996, "Measuring the Pricing Error of the Arbitrage Pricing Theory," The Review of Financial Studies, 9(2), 557-587.
23. Ghysels, E., A. C. Harvey, and E. Renault, 1995, "Stochastic Volatility," in G. S. Maddala and C. R. Rao (ed.), Handbook of Statistics, Elsevier, North-Holland, Amsterdam, Vol. 14, pp. 119-191.
24. Gomes, F., 2002, "Exploiting Short-Run Predictability," working paper, London Business School.
25. Goyal, A., and I. Welch, 2003, "Predicting the Equity Premium With Dividend Ratios," Management Science, 49(5), 639-654.
26. Graham, J. R., and C. R. Harvey, 1996, "Market Timing Ability and Volatility Implied by Investment Newsletters' Asset Allocation Recommendations," Journal of Financial Economics, 42, 397-421.
27. Graham, J. R., and C. R. Harvey, 1997, "Grading the Performance of Market-Timing Newsletters," Financial Analysts Journal, 53(6), 54-68.
28. Grinblatt, M., and S. Titman, 1993, "Performance Measurement without Benchmarks: An Examination of Mutual Fund Returns," Journal of Business, 66(1), 47-68.
29. Han, Y., 2005, "Return Predictability and Model Mis-Specification: When Can an Investor Profit from Return Predictability," working paper, Tulane University.
30. Handa, P., and A. Tiwari, 2005, "Does Stock Return Predictability Imply Improved Asset Allocation and Performance? Evidence from the U.S. Stock Market (1954-2002)" Journal of Business, forthcoming.
31. Johannes, M., N. Polson, and J. Stroud, 2002, "Sequential Optimal Portfolio Performance: Market and Volatility Timing," working paper, University of Chicago.
32. Kandel, S., and R. F. Stambaugh, 1996, "On the Predictability of Stock Returns: An Asset-Allocation Perspective," Journal of Finance, 51(2), 385-424.
33. Kim, S., N. Shephard, and S. Chib, 1998, "Stochastic Volatility: Optimal Likelihood Inference and Comparison with ARCH Models," Review of Economic Studies, 65, 361-393.
34. Knez, P. J., and M. J. Ready, 1996, "Estimating the Profits from Trading Strategies," The Review of Financial Studies, 9(4), 1121-1163.
35. Kroll, Y., H. Levy, and H. Markowitz, 1984, "Mean-Variance Versus Direct Utility Maximization," Journal of Finance, 39, 47-61.
36. Lettau, M., and S. Ludvigson, 2001, "Consumption, Aggregate Wealth and Expected Stock Returns," Journal of Finance, 56(3), 815-849.
37. Lynch, A. W., and P. Balduzzi, 2000, "Predictability and Transaction Costs: The Impact on Rebalancing Rules and Behavior," Journal of Finance, 66(5), 2285-2309.
38. Marquering, W., and M. Verbeek, 2001, "The Economic Value of Predicting Stock Index Returns and Volatility," working paper, Tilburg University.
39. Modigliani, F., and L. Modigliani, 1997, "Risk-Adjusted Performance," Journal of Portfolio Management, 23(2), 45-54.
40. Pástor, L., 2000, "Portfolio Selection and Asset Pricing Models," Journal of Finance, 55, 179-223.
41. Pástor, L., and R. Stambaugh, 2000, "Comparing Asset Pricing Models: An Investment Perspective," Journal of Financial Economics, 56, 335-381.
42. Pesaran, M. H., and A. Timmermann, 1995, "Predictability of Stock Returns: Robustness and Economic Significance," Journal of Finance, 50(4), 1201-1228.
43. Pitt, M. K., and N. Shephard, 1999, "Filtering via Simulation: Auxiliary Particle Filter," Journal of the American Statistical Association, 94, 590-599.
44. Pojarliev, M., and W. Polasek, 2000, "Portfolio Construction Using Multivariate Time Series Forecasts," working paper, Institute of Statistics and Econometrics, University of Basel.
45. Pulley, L. B., 1981, "A General Mean-Variance Approximation to Expected Utility for Short Holding Periods," Journal of Financial and Quantitative Analysis, 16, 361-373.
46. Tamayo, A., 2002, "Stock Return Predictability, Conditional Asset Pricing Models and Portfolio Selection," working paper, London Business School.
47. Treynor, J. L., and K. Mazuy, 1966, "Can Mutual Funds Outguess the Market?" Harvard Business Review, 44, 131-136.