Top

Published in:

2018 | OriginalPaper | Chapter

9. The Four Phases Framework

Author : Henrik Lumholdt

Published in: Strategic and Tactical Asset Allocation

Publisher: Springer International Publishing

Activate our intelligent search to find suitable subject content or patents.

search-config

AI-assisted search

Off

Abstract

In the previous chapter, we demonstrated the importance of the business cycle and argued in favor of understanding it in terms of the output gap. But we said only a little about asset class returns over the cycle. This is where macro meets the markets and is the focus of this chapter.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

previous chapter Tactical Macro-Drivers

The two asset classes not included here are the US dollar, represented by a dollar index future, and credit, represented by the Barclays Capital Baa Credit Index. See further, Sheikh and Sun (2012).

The study goes beyond the macro-factors reported here to include asset class and risk factor sensitivities to real yields, volatility and illiquidity. Since they are of particular interest in our context, we limit ourselves to their findings with respect to the influence of the macro-factors on the asset classes.

Each of the two macro-factors, growth and inflation, is thus a composite of two series which are first normalized to z-scores by subtracting historical means from each observation and dividing by historical volatility. For further details, see Ilmanen et al. (2014).

The author thanks Ignacio Chacon for doing the hard work of crunching the numbers when this study was undertaken.

This methodology assigns the highest weight to the central data point. Using five data points, the weights become, respectively, 11%, 22%, 33%, 22% and 11%. Because of this structure, the centered moving average is also referred to as a triangular moving average.

Biswas, A. 2014. “The Output Gap and Expected Security Returns”, Review of Financial Economics, 23(3), 131–140.CrossRef

Cooper, I., and R. Priestley. 2009. “Time-Varying Risk Premiums and the Output Gap”, Review of Financial Studies, 22, 2801–2833.CrossRef

Ilmanen, A. 2003. “Stock-bond correlations”, Journal of Fixed Income 13(2), 55–66.CrossRef

Ilmanen, Antti., Thomas Maloney and Adrienne Ross. 2014. “Exploring Macroeconomic Sensitivities: How Investments Respond to Different Economic Environments”, The Journal of Portfolio Management, 40(3), Spring.

Sheikh, A., and J. Sun. 2012. “Regime Change: Implications of Macroeconomic Shifts on Asset Class and Portfolio Performance”, The Journal of Investing, 21(3), 36–54.CrossRef

Title: The Four Phases Framework
Author: Henrik Lumholdt
Publisher: Springer International Publishing
Book: Strategic and Tactical Asset Allocation
Print ISBN: 978-3-319-89553-6

Electronic ISBN: 978-3-319-89554-3

Copyright Year: 2018
DOI: https://doi.org/10.1007/978-3-319-89554-3_9