Over the last fifteen years, foreign official holdings of U.S. Treasuries reached unprecedented levels, being central banks, especially in developing countries, the first to significantly increase their holdings; which calls for an analysis of risk-factor portfolio allocation to U.S. government bonds. This paper focus on examining how changes in the liquidity differential between nominal and TIPS yields influences optimal portfolio allocations in U.S. Treasury securities. Based on a nonparametric estimation technique and comparing the optimal allocation decisions of mean-variance and CRRA investor, when investment opportunities are time varying, I present evidence that liquidity risk premium is a significant risk-factor in a portfolio allocation context. In fact, I find that a conditional allocation strategy translates into improved in-sample and out-of sample asset allocation and performance.
Acerca del expositor
Profesora Universidad Nacional de Colombia, sede Medellín. Ph.D. en Economía y Magíster en Finanzas de
Toulouse School of Economics. Máster en Economía y Economista de la Universidad de Antioquia. Se ha desempeñado como docente de cátedra en EAFIT, la Universidad de Antioquia y la Universidad del Rosario. Sus áreas de investigación son:
Fixed Income securities, Empirical asset pricing, Term structure models, Applied Econometrics.