Equity Asset Allocation Model for EUR-based Eastern Europe Pension Funds
AbstractThis paper is aimed to explain the choice of instrument mix for EUR-based long-term equity investors, like pension funds, in the Eastern Europe. It is assumed that investments into local securities are the investors’ preferred choice. Markowitz mean-variance optimization was used for determining optimal portfolios. Exponentially weighted historical time-series were used for input data. After finding an efficient set of portfolios hypothetical 100€ was invested (as of March 1993) into the portfolio and this investment was benchmarked against EUR-hedged MSCI World index. Different portfolio mixes with several rebalancing frequencies were tested in the way described. Portfolio mix proposed for real investments is the following: MSCI, North America (40%); MSCI, Europe (35%); MSCI Pacific (10%); MSCI Emerging Markets Free (10%) and MSCI Eastern Europe (5%). This portfolio mix gave a positive result over the period compared to benchmark. Suggested rebalancing frequency is 1 month.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Tallinn School of Economics and Business Administration, Tallinn University of Technology in its series Working Papers with number 119.
Date of creation: 2004
Date of revision:
Publication status: Published in Working Papers in Economics, School of Economics and Business Administration,Tallinn University of Technology (TUTWPE), Pages 245-254
Note: The author would like to thank Dr Jaan Kalda for fruitful discussions and Hansa Investment Funds Ltd for supporting the research. The financial support from the Estonian Science Foundation (grant No 5036) is greatly appreciated.
Contact details of provider:
Postal: Kopli tn. 101, 11712 Tallinn
Phone: +(372)620 3535
Fax: +(372)620 3946
Web page: http://majandus.ttu.ee
More information through EDIRC
Portfolio theory; mean-variance optimization;
Find related papers by JEL classification:
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
- C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
- G1 - Financial Economics - - General Financial Markets
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Urve Venesaar).
If references are entirely missing, you can add them using this form.