Global Asset Allocation Shifts

70 Pages Posted: 1 Apr 2015

See all articles by Tim Alexander Kroencke

Tim Alexander Kroencke

University of Neuchatel - Institute of Financial Analysis

Maik Schmeling

Goethe University Frankfurt - Department of Finance; Centre for Economic Policy Research (CEPR)

Andreas Schrimpf

Bank for International Settlements (BIS) - Monetary and Economic Department

Multiple version iconThere are 2 versions of this paper

Date Written: March 2015

Abstract

We show that global asset reallocations of U.S. fund investors obey a strong factor structure, with two factors accounting for more than 90% of the overall variation. The first factor captures switches between U.S. bonds and equities. The second reflects reallocations from U.S. to international assets. Portfolio allocations respond to U.S. monetary policy, most prominently around FOMC events when institutional investors reallocate from basically all other asset classes to U.S. equities. Reallocations of both retail and institutional investors show return-chasing behavior. Institutional investors tend to reallocate toward riskier, high-yield fixed income segments, consistent with a search for yield.

Keywords: Portfolio Rebalancing, Mutual Funds, Momentum, Search For Yield, Monetary Policy

JEL Classification: G11, G15, F30

Suggested Citation

Kroencke, Tim Alexander and Schmeling, Maik and Schrimpf, Andreas, Global Asset Allocation Shifts (March 2015). BIS Working Paper No. 497. Available at SSRN: https://ssrn.com/abstract=2584634

Tim Alexander Kroencke (Contact Author)

University of Neuchatel - Institute of Financial Analysis ( email )

Pierre-a-Mazel,7
Neuchatel, CH-2000
Switzerland

Maik Schmeling

Goethe University Frankfurt - Department of Finance ( email )

House of Finance
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, Hessen 60323
Germany

HOME PAGE: http://sites.google.com/site/maikschmeling/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Andreas Schrimpf

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

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