TITLE:
Dynamic Optimization for Equity and Dollar Asset: The Case of Japan
AUTHORS:
Chikashi Tsuji
KEYWORDS:
MGARCH, Nikkei 225, Optimal Portfolio Weight, Yen-Dollar Rate
JOURNAL NAME:
Modern Economy,
Vol.15 No.4,
April
30,
2024
ABSTRACT: This article examines the time-varying optimal portfolio weights for the two assets denominated in Japanese yen—the Nikkei 225 index and the yen-dollar rate—for four different periods from 1973 to 2023. Using a VAR-bivariate GARCH model and an optimization method, we uncover that in the more recent period, higher portfolio weights for the yen-dollar rate—a dollar asset for Japanese investors—were more efficient in constructing the Japanese equity and dollar asset portfolio.