Macroeconomic Uncertainty, Correlations between Different Financial Markets, and Three-Asset Allocation Strategies

• Main Authors: Shih-yun Huang, 黄詩芸
• Other Authors: Guang-di Chang
• Format: Others
• Language: en_US
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/36740665277950338634

碩士 === 國立臺灣科技大學 === 財務金融研究所 === 101 === This study is aimed to investigate whether there is a relationship between correlations in different financial markets and macroeconomic uncertainty factors, regarding three-asset allocation strategies. We apply the monthly data of inflation, industrial production and the VIX Index to be the proxies of the macroeconomic uncertainties. Our data samples include the G7 and emerging Asian countries from 2004 to 2011. Furthermore, the vector error correction model (VECM) is used to examine the effects of uncertainty in macroeconomic variables on correlations between the G7 and emerging Asia indices. Our results show that correlations of six portfolios are significantly affected by different macroeconomic variables. In summary, in developed countries, changes in the correlations are positively related to changes in industrial production uncertainty; and for World Stock Portfolio, changes in emerging markets inflation uncertainty, changes in industrial production uncertainty of developed and emerging markets and changes in the VIX Index are significantly associated with correlations between developed and emerging Asia stocks markets. We conclude that investors and asset managers can benefit from diversifying into different financial markets and asset classes.