4106 Advanced Investment Management Tactical Asset Allocation 2 session 6 Andrei Simonov Tactical Asset Allocation 11/28/2018.

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4106 Advanced Investment Management Tactical Asset Allocation 2 session 6 Andrei Simonov Tactical Asset Allocation 11/28/2018

Agenda Statistical properties of volatility. Persistence Clustering Fat tails Is covariance matrix constant? Predictive methodologies Macroecon variables Modelling volatility process: GARCH process and related methodologies Volume Chaos Skewness Tactical Asset Allocation 11/28/2018

Co-skewness Describe the probability of the assets to run-up or crash together. Examples: ”Asian flu” of 98,” crashes in Eastern Europe after Russian Default. Can be partially explained by the flows. Important: Try to avoid assets with +’ve co-skewness Difficult to measure. Tactical Asset Allocation 11/28/2018