Asset Allocation by Investment Professionals: Integration or Segmentation?
54 Pages Posted: 16 Nov 2016 Last revised: 15 Dec 2016
Date Written: December 2, 2016
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: Suggested Citation