A Frequency Domain Methodology for Time Series Modelling

Hens Steehouwer

Chapter 15 in Interest Rate Models, Asset Allocation and Quantitative Techniques for Central Banks and Sovereign Wealth Funds, 2010, pp 280-324 from Palgrave Macmillan

Abstract: Abstract Determining an optimal Strategic Asset Allocation (SAA) in general, and for Central Banks and Sovereign Wealth Managers in particular, is essentially a decision-making problem under uncertainty. How well or badly a selected SAA will perform in terms of the objectives and constraints of the stakeholders will depend on the future evolution of economic and financial variables such as interest rates, asset returns and inflation rates. Uncertainty about the future evolution of these variables is traditionally modelled by means of (econometric) time series models. Campbell and Viceira (2002) provide an example of this approach. They estimate Vector AutoRegressive (VAR) models on historical time series and derive optimal investment portfolios from the statistical behaviour of the asset classes on various horizons as implied by the estimated VAR model.

Keywords: Interest Rate; Business Cycle; High Frequency Component; Financial Variable; Data Generate Process (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-25129-8_15

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DOI: 10.1057/9780230251298_15

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