DYNAMIC PORTFOLIO STRATEGY - USING A MULTIVARIATE GARCH MODEL

Abstract: This paper examines if it is possible to achieve a higher cumulative and risk adjusted return through an active portfolio strategy compared to a passive portfolio strategy. This is done through a mean-variance framework in which the variance is forecasted using two different models. The results show that it is possible achieve a higher cumulative and risk adjusted return by dynamically changing the weights of the assets in the portfolio. Especially if a simple market timing rule is used.