IDEAS home Printed from https://ideas.repec.org/a/wsi/ijtafx/v25y2022i04n05ns0219024922500182.html
   My bibliography  Save this article

Market Timing In Parametric Portfolio Policies

Author

Listed:
  • CARLOS OSORIO

    (Chair of Finance, University of Bremen, Enrique-Schmidt-Straße 1, Bremen 28359, Germany)

  • THORSTEN PODDIG

    (Chair of Finance, University of Bremen, Enrique-Schmidt-Straße 1, Bremen 28359, Germany)

  • CHRISTIAN FIEBERG

    (Empirical Capital Market Research and Derivatives, University of Bremen, Enrique-Schmidt-Straße 1, Bremen 28359, Germany)

  • MICHAEL OLSCHEWSKY

    (Quantitative Asset Management, Treasury, Hamburger Sparkasse, Wikingerweg 1, Hamburg 20537, Germany)

  • MICHAEL FALGE

    (Chair of Finance, University of Bremen, Enrique-Schmidt-Straße 1, Bremen 28359, Germany)

Abstract

We extend the parametric portfolio policies that exploit firm characteristics to optimize portfolios of stocks and are thus based on asset selection. In addition to this, our extension exploits market indicators for market timing purposes (i.e. optimal allocations between stocks and a risk-free asset). We demonstrate the mechanics of the proposed technique in simulation studies. Specifically, we show that the extended approach is able to produce portfolios based on selection and timing that outperform portfolios that only apply selection, when the applied market indicators have sufficient predictive power. In purely demonstrative empirical applications, we illustrate how investors can use our optimization approach using common market indicators.

Suggested Citation

  • Carlos Osorio & Thorsten Poddig & Christian Fieberg & Michael Olschewsky & Michael Falge, 2022. "Market Timing In Parametric Portfolio Policies," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 25(04n05), pages 1-28, June.
    • Handle: RePEc:wsi:ijtafx:v:25:y:2022:i:04n05:n:s0219024922500182
    DOI: 10.1142/S0219024922500182
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0219024922500182
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0219024922500182?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:ijtafx:v:25:y:2022:i:04n05:n:s0219024922500182. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ijtaf/ijtaf.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.