The Determinants Impact on Different Assets Allocation Portfolio Strategy Return: Evidence from Selected Asia Pacific Countries

Tan, Yin Tien (2024) The Determinants Impact on Different Assets Allocation Portfolio Strategy Return: Evidence from Selected Asia Pacific Countries. Masters thesis, Tunku Abdul Rahman University of Management and Technology.

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Abstract

This study delves into the effects of portfolio strategy on investment returns in selected Asia-Pacific countries, with a particular focus on adapting to the complex and evolving macroeconomic landscape. The research explores the performance of the traditional 60/40 portfolio strategy, wherein 60% of investments are allocated to the stock index and 40% to the bond index, and compares it with alternative asset allocation models (70/30 and 80/20) to assess their efficacy in maximising returns and mitigating risks. Key macroeconomic variables, including the unemployment rate, economic growth, inflation rate, exchange rate, and technological innovation, are analysed to understand their influence on portfolio returns. The study aims to uncover how these variables interact with different asset allocations, offering a nuanced view of the traditional 60/40 strategy’s limitations in the current economic climate characterised by rising inflation, fluctuating bond yields, and significant shifts in investor sentiment. Given the increasing challenges posed by economic volatility, this research emphasises the necessity of a more dynamic and responsive approach to portfolio management. It investigates whether reallocation strategies that move away from the traditional 60/40 split can better accommodate the realities of modern financial markets, where fixed-income investments are often perceived as less effective, sometimes referred to as “dead money.” By conducting a thorough empirical analysis, the study not only contributes to the theoretical discourse on modern portfolio theory and its practical applications but also offers actionable insights for investors, financial advisors, and policymakers. These insights are critical for developing investment strategies that are resilient to economic shifts, tailored to varying risk appetites, and capable of achieving sustainable long-term returns. The findings underscore the importance of revisiting and potentially recalibrating traditional investment strategies to align with contemporary market conditions, thereby enhancing the overall robustness and effectiveness of portfolio management in achieving desired financial outcomes.