Monetary Policy and Risk-Based Asset Allocation |
| |
Authors: | Alexis Flageollet Hamza Bahaji |
| |
Institution: | 1.NATIXIS Asset Management,Paris,France;2.University of Paris Dauphine,Paris,France |
| |
Abstract: | This paper focuses on the effects of the Fed’s monetary policy on stock and bond returns co-movement and their implications to risk-based asset allocation. Using a regime-switching model that controls for the economic effects of monetary policy we identify three co-movement regimes. We document that risk-based portfolio strategies poorly perform in the low correlation regime which features inflation shocks. We find outperformance evidence under the negative correlation regime with a high stock market risk and a very accommodating Fed policy. Less effectiveness is demonstrated under the positive correlation regime where bonds are regarded as risky assets and interest rate volatility is fueled by monetary policy. |
| |
Keywords: | |
本文献已被 SpringerLink 等数据库收录! |