The role of high-yield bonds in strategic asset allocation over the Great Recession

Date

2017-11-13

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Journal Title

Journal ISSN

Volume Title

Publisher

LLC “Consulting Publishing Company “Business Perspectives”

Department

Type

Article

ISSN

1810-4967

Format

Free to read from

Citation

Georgios Menounos, Constantinos Alexiou and Sofoklis Vogiazas (2017). The role of high-yield bonds in strategic asset allocation over the Great Recession. Investment Management and Financial Innovations, 14(3), 270-279

Abstract

By utilizing a modified version of the Black-Litterman model, the authors explore the asset allocation to high-yield bonds based on an investor’s risk profile. In so doing, the researchers use US data on high-yield bonds and over the period 2007–2013. The key finding relates to the strategic asset allocation to high-yield bonds in a simulated global market portfolio depending on an investor’s risk tolerance. In particular, the share of high-yield bonds does not exceed 4.15% of total assets in a global market portfolio over the period 2007–2013, whilst the allocation remains relatively stable and small on a risk-adjusted basis, irrespective of an investor’s risk profile or the phase of the business cycle. In simple terms, the results suggest that high-yield bonds do not seem to merit a favorable treatment in the asset allocation process relative to other financial instruments in a global market portfolio.

Description

Software Description

Software Language

Github

Keywords

lack-Litterman model, high-yield bonds, asset allocation, global financial crisis

DOI

Rights

Attribution-NonCommercial 4.0 International

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