Abstract
This dissertation looks at the dynamic asset allocation strategy for a South African economy-based portfolio. The proposed strategy allocates assets within a portfolio based on the prevailing volatility regime of the market. That is, the strategy attempts to exploit the time – variation of risk and stabilizes risk across different volatility regimes while protecting the accumulated profits. Our empirical results show that compared to the traditional strategic asset allocation, this framework provides significantly higher returns due to its ability to minimize the risk by switching asset allocation during different volatility periods. This allows for asset managers to have a robust framework for investing in high volatility markets such as emerging economies. The fact that our South African based portfolio provides significantly greater returns strengthens the case for use of such markets in emerging markets given the volatility of their markets.
M.Com. (Financial Economics)