Economic Cycle,Asset Price And Asset Allocation Of Institutional Investors

The core problem of assets allocation is the uncertain market conditions. The development of relevant research includes three phase: qualitative, quantitative and projective. The current major researches include theories based on rational behavior and effective market such as CAPM, investment portfolio theory and Multifactor models, and theories based on irrational behaviors such as BPT. However what rarely seen is decision-making theories based on macroeconomic factors. By means of logic and math, the paper discusses factors during different phase in economic circle impacting return of stocks and bonds and the transmission system. Afterwards, the author explains the category, characteristics of economic circle, economic factors and ways to identify economic circle. Then the paper put forward assets allocation advices. Finally, in consideration of immature market in China, the paper discusses the importance to understand character of Chinese market and advice to add derivatives into assets allocation.As for theories, the author describes the concept of capital allocation, with emphasize on the development of relevant theories. As for the impact of economic circle on return of assets, the author inducts from stock pricing models to analysis the transmission system of the expectation of income growth and interest rate impacting stock price; and the transmission system of macroeconomic factors impacting ROA. Finally, the author emphasizes on how to identify economic circle and provide some advices on how to allocate assets in the present conditions in China.