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International Conditional Asset Allocation under Real Time Uncertrainty

Listed author(s):
  • Laruent Barras

    (HEC, University of Geneva and FAME)

Registered author(s):

    This paper examines the impact of real time uncertainty on the performance of international mean-variance conditional asset allocation. This notion can be defined as the uncertainty faced by an investor regarding specification choices necessary to implement a conditional strategy. To assess the impact of this phenomenon, we investigate a comprehensive set of strategies based on several countries that an investor could reasonably consider. We find that real time uncertainty significantly reduces the performance of international conditional asset allocation. Our findings provide an explanation to the apparent paradox between the statistical and economic significance of predictability that has been previously documented. These results are consistent with the semi-strong form of market efficiency

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    File URL: http://www.swissfinanceinstitute.ch/rp53.pdf
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    Paper provided by International Center for Financial Asset Management and Engineering in its series FAME Research Paper Series with number rp153.

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    Date of creation: Jul 2005
    Handle: RePEc:fam:rpseri:rp153
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    1. Robert R. Bliss, 1997. "Movements in the term structure of interest rates," Economic Review, Federal Reserve Bank of Atlanta, issue Q 4, pages 16-33.
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    7. Hirotugu Akaike, 1987. "Factor analysis and AIC," Psychometrika, Springer;The Psychometric Society, vol. 52(3), pages 317-332, September.
    8. Fama, Eugene F & Bliss, Robert R, 1987. "The Information in Long-Maturity Forward Rates," American Economic Review, American Economic Association, vol. 77(4), pages 680-692, September.
    9. Longstaff, Francis A. & Santa-Clara, Pedro & Schwartz, Eduardo S., 2001. "Throwing away a billion dollars: the cost of suboptimal exercise strategies in the swaptions market," Journal of Financial Economics, Elsevier, vol. 62(1), pages 39-66, October.
    10. Knez, Peter J & Litterman, Robert & Scheinkman, Jose Alexandre, 1994. " Explorations into Factors Explaining Money Market Returns," Journal of Finance, American Finance Association, vol. 49(5), pages 1861-1882, December.
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