Asset Allocation with a High Dimensional Latent Factor Stochastic Volatility Model ∗

@inproceedings{Han2005AssetAW,
  title={Asset Allocation with a High Dimensional Latent Factor Stochastic Volatility Model ∗},
  author={Yufeng Han},
  year={2005}
}
We investigate the implications of time-varying expected return and volatility on asset allocation in a high-dimensional setting. We propose a DFMSV model that allows the first two moments of returns to vary over time for a large number of assets. We then evaluate the economic significance of the DFMSV model by examining the performance of various dynamic portfolio strategies chosen by mean-variance investors in a universe of 36 stocks. We find that the DFMSV dynamic strategies significantly… CONTINUE READING
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