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Dynamic strategies to optimize asset allocation: empirical evidence in the Brazilian market

  • Hedmilton Mourão Cardoso

    (IBMEC-RJ)

  • Claudio Henrique da Silveira Barbedo

    (IBMEC-RJ)

  • José Valentim Machado Vicente

    (IBMEC-RJ)

Registered author(s):

    Short-term return bear influence on common investors and fund managers. However, the correct forecast of short-term market movements is not a trivial task. The purpose of this essay is to verify, according to Herold et al. (2007), if the dynamic allocation amongst main Brazilian asset classes can generate long-term gains and limit losses in shorter periods. The test results involving Ibovespa as the only risk asset confirmed this purpose. Tests involving fixed-income assets, variable-income assets and inflation-linked assets proved that the return is limited by this strategy. Static allocation and protection strategies were concurrently tested for short-term situations.

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    File URL: http://www.bbronline.com.br/public/edicoes/9_2/artigos/1nj4nk18vv1962012155623.pdf
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    Article provided by Fucape Business School in its journal Brazilian Business Review.

    Volume (Year): 9 (2012)
    Issue (Month): 2 (April)
    Pages: 109-133

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    Handle: RePEc:bbz:fcpbbr:v:9:y:2012:i:2:p:109-133
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    1. Jiang, Chonghui & Ma, Yongkai & An, Yunbi, 2009. "The effectiveness of the VaR-based portfolio insurance strategy: An empirical analysis," International Review of Financial Analysis, Elsevier, vol. 18(4), pages 185-197, September.
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    5. Stulz, ReneM., 1982. "Options on the minimum or the maximum of two risky assets : Analysis and applications," Journal of Financial Economics, Elsevier, vol. 10(2), pages 161-185, July.
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    7. Dichtl, Hubert & Drobetz, Wolfgang, 2011. "Portfolio insurance and prospect theory investors: Popularity and optimal design of capital protected financial products," Journal of Banking & Finance, Elsevier, vol. 35(7), pages 1683-1697, July.
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