Georgios Menounos
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The role of high-yield bonds in strategic asset allocation over the Great Recession
Georgios Menounos , Constantinos Alexiou , Sofoklis Vogiazas doi: http://dx.doi.org/10.21511/imfi.14(3-1).2017.11Investment Management and Financial Innovations Volume 14, 2017 Issue #3 pp. 270-279
Views: 1060 Downloads: 231 TO CITE АНОТАЦІЯBy utilizing a modified version of the Black-Litterman model, the authors explore the asset allocation to high-yield bonds based on an investor’s risk profile. In so doing, the researchers use US data on high-yield bonds and over the period 2007–2013. The key finding relates to the strategic asset allocation to high-yield bonds in a simulated global market portfolio depending on an investor’s risk tolerance. In particular, the share of high-yield bonds does not exceed 4.15% of total assets in a global market portfolio over the period 2007–2013, whilst the allocation remains relatively stable and small on a risk-adjusted basis, irrespective of an investor’s risk profile or the phase of the business cycle. In simple terms, the results suggest that high-yield bonds do not seem to merit a favorable treatment in the asset allocation process relative to other financial instruments in a global market portfolio.