Asset Allocation by Investment Professionals: Integration or Segmentation?

54 Pages Posted: 16 Nov 2016 Last revised: 15 Dec 2016

See all articles by Lars Kaiser

Lars Kaiser

University of Liechtenstein

Date Written: December 2, 2016

Abstract

This study is the first to consider ``Reuters Global Asset Allocation Poll'' data, which is a monthly survey of recommended global portfolio allocations from many of the world's top investment firms, based in the U.S., UK, Continental Europe, and Japan. We find that balanced portfolio allocations by professional investors, considered in this study, closely align with the traditional 60/40 policy for asset allocation. Furthermore, we provide strong evidence on the existence of an equity home bias for investors from all four regions whereas evidence on the bond home bias tends to be equal to or stronger than for equities, however less robust across considered models. Moreover, we report a negative relation between the level of implied risk aversion and the degree of home bias and conclude that the degree of foreign asset allocation decreases in an increase of risk aversion. Finally, findings in this study indicate that about 80-90% of an investors total return can be attributed to the strategic allocation with a strong impact of economic conditions on the asset class allocation of investment professionals around the world.

Keywords: Reuters Global Asset Allocation Poll, Investment Professionals, Home Bias, Equity Bias, Implied Risk Aversion, Diversification, Portfolio Reallocation, TAA, SAA, ICAPM

JEL Classification: G11, G17

Suggested Citation

Kaiser, Lars, Asset Allocation by Investment Professionals: Integration or Segmentation? (December 2, 2016). Available at SSRN: https://ssrn.com/abstract=2869984 or http://dx.doi.org/10.2139/ssrn.2869984

Lars Kaiser (Contact Author)

University of Liechtenstein ( email )

Fürst Franz Josef Strasse
Vaduz, 9490
Liechtenstein
+423 265 1186 (Phone)

HOME PAGE: http://www.uni.li/lars.kaiser

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