Market Risk Equity Asset Allocation
|School||Chongqing Technology and Business University|
|Keywords||Equity Fund Asset Allocation VaR CVaR|
With the growing stock market risk, risk management of equity funds is particularly important.Statistical data of Funds Research Center in Galaxy Securities showed that the maximum deviation of the yield of open-end fund is more than 100 percent in 2009. According to research at home and abroad, difference of fund performance is mainly explained by asset allocation. Asset allocation of equity funds primarily means that the investment is allcated among stocks of different return and risk. Fund managers need to calculate the size of the risk in contrast with their risk tolerance with their own, in order to determine the amount of investment and investment strategy, to reduce the blindness of investment, and minimize the loss caused by investment decision-making error. Therefore, the risk measurement, becoming a key factor of asset allocation of equity funds, directly affects the performance of equity funds.The traditional measure of market risk has inherent defects. It could not meet the needs of the modern market risk management. VaR(Value at Risk) and CVaR (Conditional Value at Risk) approach, based on theory of probability and statistics, could measure the risk of different financial products and portfolios. It has the absolute advantage. This paper tries to research into the risk measurement of equity funds on asset allocation in China and researchs into the risk mearsure of asset allocation, including market allocation, sector allocation and portfolio, with the application of VaR and the CVaR method. So some theoretical and practical value exists in this paper.First, this article tries to divide asset allocation into three levels, including market allocation, sector allocation and portfolio.nextly, two types of measurement methods of traditional market risk are introducted. the basic principles of VaR and CVaR are elaborated, including the meaning, formula derivation of parameter method and return test and the fitting model of volatility - GARCH family models. Then, empirical studies about the market risk measure are made, based on market allocation, sector allocation and portfolio. Finally, empirical findings are analyzed and the shortcomings and future research directions are pointed out.