The Research Of Closed-end Funds Type Asset Allocation

As is known to all, the risk of portfolio will be reduced when investing in different types of assets. How to allocate assets is the key problem in asset allocation area. With the rapid development of the securities market and awareness of investment, asset allocation theory is playing a very important role in the modern investment decision. It is not only for the safety of securities investment decision; but also the basic factor for rentability. Face with a great variety of financial assets, the key point of earning lucrative profits is to pick out the real value investment and to allocate reasonably in all kinds of assets.Asset allocation theory in financial market application has made proud achievements. In recent studies, it is normal to see the theory is applied into macro aspect, for example stocks, bonds and currency. There are still a few papers standing in microscopic aspect, for example studying the application into open-funds. Based on this inspiration, this theory is applied into closed-end fund in this paper, which is an innovation in this field.Although the phenomenon of high discount rate of closed-end fund exists, according to statistic data by Galaxy Securities, closed-end fund have been a better performance compared with market return. It is notable that two innovative funds were warmly pursued in sep.,2007. From then on, innovative funds are fiery issuing in the native market. It has aroused the sleeping closed-end fund circulation market, and also opened new era for closed-end fund development. The appearance of innovative closed-end fund especially the grade structure fund makes the theory applied into closed-end fund possible. Using the theory of asset allocation, this study intends to provide an investment strategy which can spread risk and increase profit for investors.The guideline of this study is that basing on fund risk characteristic, closed-end fund were divided into three types:leveraged fund, bond fund and non grade structure fund. Then, basing on the time series characteristic of three type funds, the forecast model was simulated and the predicted value in the first half year of 2010 were got. Mean-variance model was built to calculate the optimal allocation ratio. The result proved that it can effectively reduce risk and increase profit. Finally, this paper presented an approach in second allocation in closed-end fund type.