EconPapers    
Economics at your fingertips  
 

Liability driven investment with alternative assets: Evidence from Brazil

Márcio R. Bernardo and Carlos Heitor Campani ()

Emerging Markets Review, 2019, vol. 41, issue C

Abstract: We study the portfolio choice problem for an asset-liability investor who invests in stocks, equity mutual funds, government bonds, short term interest, hedge funds, listed real estate, and commodities futures available in Brazil. Inflation and real interest play as important risk sources. We estimate the asset classes and liabilities time-varying conditional covariance structure using an asymmetric multivariate dynamic conditional correlation GARCH model and compare the asset-liability portfolio's global minimum variance allocation with Brazilian pension funds' market portfolio. The conditional covariance structure provides insights about the complex dynamic relationships between the asset classes and liabilities. We find that some (though not all) Brazilian alternative assets render strong diversification and liabilities hedging benefits for asset-liability investors. There are significant strategic asset allocation differences between the market portfolio and the liability driven portfolio as given by our model. We, therefore, question the Brazilian pension funds' allocation.

Keywords: Liability driven allocation; Alternatives assets; Emerging markets; Risk management; Portfolio choice (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1566014119300597
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:41:y:2019:i:c:s1566014119300597

DOI: 10.1016/j.ememar.2019.100653

Access Statistics for this article

Emerging Markets Review is currently edited by Jonathan A. Batten

More articles in Emerging Markets Review from Elsevier
Bibliographic data for series maintained by Nithya Sathishkumar ().

 
Page updated 2021-03-28
Handle: RePEc:eee:ememar:v:41:y:2019:i:c:s1566014119300597