Use of Dynamic Asset Allocation During Inflationary Periods Using Hidden Markov Models to Maximise Risk Adjusted Returns In Zimbabwe
- Author
- Chatikobo, Molety
- Title
- Use of Dynamic Asset Allocation During Inflationary Periods Using Hidden Markov Models to Maximise Risk Adjusted Returns In Zimbabwe
- Abstract
-
Static asset allocation involves maintaining fixed asset allocations which are not responsive to
time-varying expected returns and risk. The research intends to analyse the significance of
using dynamic asset allocation that incorporates time-varying expected return and risk, to
maximise risk-adjusted returns during inflationary periods in the Zimbabwean Markets. The
dynamic allocation decisions are based on the inflation regimes identified by using Hidden
Markov Models (HMMs). The study used samples of two HMMs on a dynamic portfolio and
compared the performance of the portfolio to the static portfolio. The two methods using
HMMs had better risk-adjusted returns than the static portfolio for the period under study. The
analysis was mainly on Zimbabwean inflation, interest rates and All-share Index data. The
findings for the Zimbabwean market were consistent with other research on international
markets such as the S&P 500 in America - Date
- 2023
- Publisher
- BUSE
- Keywords
- Dynamic Asset Allocation
- Risk Adjusted Returns
- Supervisor
- Miss Hlupo
- Item sets
- Department of Statistics and Mathematics
