The Economic Value of Distributional Timing

Eric Jondeau and Michael Rockinger ()

No 06-35, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We evaluate how non-normality of asset returns and the temporal evolution of volatility and higher moments affects the conditional allocation of wealth. We show that if one neglects these aspects, as would be the case in a mean variance allocation, a significant cost would arise. The performance fee the investor is willing to pay to benefit from our allocation is as high as the fee she is willing to pay to benefit from volatility timing. Many tests of robustness are performed, yet, the economic value of taking the non-normality and the temporal evolution of the distribution into account remains.

Keywords: Non-normality; volatility timing; distributional timing; GARCH; portfolio allocation (search for similar items in EconPapers)
JEL-codes: C22 C51 F37 G11 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2006-11
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:0635

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