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  • Regimes in Australian pension fund returns: a hidden semi-Markov approach

    Author(s)
    Bianchi, RJ
    Drew, ME
    Walk, AN
    Griffith University Author(s)
    Bianchi, Robert
    Drew, Michael E.
    Walk, Adam
    Year published
    2012
    Metadata
    Show full item record
    Abstract
    Regimes are of interest to investors as they describe periods of episodic changes in returns and volatility caused by the non-normality and non-linearity characteristics of financial returns. The literature to date has examined regimes in single asset classes with little emphasis on the regime behavior of diversified (i.e. multi-asset investment) portfolios. This study examines whether lowering risk or increasing asset diversification are valid methods for investors to temper the regime behavior of their portfolios. Using a hidden semi-Markov model, the authors analyze the returns of two pension (i.e. superannuation) fund ...
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    Regimes are of interest to investors as they describe periods of episodic changes in returns and volatility caused by the non-normality and non-linearity characteristics of financial returns. The literature to date has examined regimes in single asset classes with little emphasis on the regime behavior of diversified (i.e. multi-asset investment) portfolios. This study examines whether lowering risk or increasing asset diversification are valid methods for investors to temper the regime behavior of their portfolios. Using a hidden semi-Markov model, the authors analyze the returns of two pension (i.e. superannuation) fund investment portfolios at opposite ends of the risk spectrum, namely a low risk cash- based portfolio and a moderate-to-high risk, but highly diversified, balanced portfolio. The findings show that asset class diversification does not appear to offer any noticeable benefits in relation to managing the regime behavior of investment portfolios. The findings also reveal that risk-reduction towards a cash based investment does not mitigate regimes in diversified portfolios.
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    Journal Title
    Investment Management and Financial Innovations
    Volume
    9
    Issue
    1
    Publisher URI
    https://brill.com/
    Copyright Statement
    Self-archiving of the author-manuscript version is not yet supported by this journal. Please refer to the journal link for access to the definitive, published version or contact the author[s] for more information.
    Subject
    Banking, finance and investment
    Finance
    Investment and risk management
    Publication URI
    http://hdl.handle.net/10072/46909
    Collection
    • Journal articles

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