Dissecting the cycles: An intermarket investigation and its implications to portfolio reallocation

Kuo-Yuan Liang and Chen-Hui Yen

International Review of Economics & Finance, 2014, vol. 33, issue C, 39-51

Abstract: By applying spectral analysis, this paper discovered that: (1) bond, equity, and commodity markets followed regular cyclical patterns of the business cycle that lasted 3.5 to 7.5years; (2) four significant lead or lag relationships existed between the business cycle and the three markets, where the business cycle led the commodity market, but first lagged the stock market and then the bond market, while the bond market led the commodity market. We also show that if investors can perfectly gage their positioning in the business cycle, they can enhance their returns by reallocating assets between bonds, stocks, and commodities in the portfolio accordingly.

Keywords: Business cycles; Portfolio choice; Spectral analysis (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056014000306
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:reveco:v:33:y:2014:i:c:p:39-51

DOI: 10.1016/j.iref.2014.02.010

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().