Asset Allocation Strategy Based on Inflation Expectation Economic Cycle

DOI

10.2991/assehr.k.211209.413How to use a DOI?

Keywords

Inflation expectation; Investment Clock; Asset allocation; Economic periods

Abstract

Economy is periodically. In different period of economic, different kinds of asset (stock, bonds, commodities, gold) met different situation. How to divide and identify economic cycle [1,2] accurately that is very important to make an investment strategy and asset allocation [3]. The traditional way to divide economic period was based on the Merrill Lynch Investment Clock [4]. According to GDP growth rate and inflation rate, economic is divided into 4 periods, including inflation, deflation, disinflation, reinflation. There are different strategies to allocate assets. For example, before 2012, ML’s Investment Clock are very effective in China, but after 2012 this strategy was out of order. Hence, it is important to explore a new strategy about division of economic periods. In the paper below, we separate economy into 4 periods based on the magnitude and direction of inflation expectation [5,6]. We study in the performances with different assets on different economic periods. Base on the performance of various assets in different economic cycles and the essence of assets, we establish a new strategy about allocate asset. And we back test our strategy by historical data to investigate whether our asset allocation strategy we developed are efficiency and reliable. In this strategy, we achieve annualized rate of return 14.84% and sharp ratio1.16. In the following research, we will pay attention to various cyclical industry allocation strategies or sector allocation strategies in different economic cycles.

Copyright

© 2021 The Authors. Published by Atlantis Press International B.V.

Open Access

This is an open access article under the CC BY-NC license.

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TY  - CONF
AU  - Yifu Chen
PY  - 2021
DA  - 2021/12/15
TI  - Asset Allocation Strategy Based on Inflation Expectation Economic Cycle
BT  - Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021)
PB  - Atlantis Press
SP  - 2540
EP  - 2545
SN  - 2352-5428
UR  - https://doi.org/10.2991/assehr.k.211209.413
DO  - 10.2991/assehr.k.211209.413
ID  - Chen2021
ER  -