Global Asset Allocation Shifts
70 Pages Posted: 1 Apr 2015
Date Written: March 2015
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: Suggested Citation