AI in the Classroom: Explore with Carlson School's Expert Faculty!
06 January 2027
9:30 AM EDT
Can Bonds Still Diversify Multi-Asset Portfolios? Income versus Duration in Distinct Correlation Regimes
Analyzing Income, Duration, and Correlation in Multi-Asset Investing
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About the Masterclass
We analyze the diversification benefits of fixed-income instruments under time-varying correlations. We estimate monthly, non-overlapping correlations from daily 10-year Treasury bond returns over the period January 1962 to May 2025. With these data, we use a hidden Markov model to identify three distinct correlation regimes, negative, zero, and positive. These regimes are highly persistent and differ in their diversification value depending on the importance of income versus duration as drivers of bond returns. Dynamically altering the mix of multi-asset portfolio allocations based on the most likely correlation regime materially improves returns while controlling risk.
What will you learn?
Discover data-driven portfolio strategies
Learn hidden Markov model applications
Understand bond diversification dynamics
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Career Insights and Opportunities
Learn about the Berkeley HAAS experience
Networking and Access to Expert Insights
University of California, Berkeley | Haas School of Business
UC Berkeley Haas School of Business, established in 1898, is a global leader in business education, known for its innovation and excellence. Located in the heart of the Bay Area, Haas is positioned at the epicenter of technology and finance, offering students unparalleled access to industry leaders and cutting-edge research. With a student body of approximately 1,400 and a faculty of over 90 distinguished professors, Haas provides a dynamic learning environment. The school' s Master of Financial Engineering program is highly regarded for its integration of advanced quantitative methods and machine learning, equipping graduates with the skills to excel in a rapidly evolving finance landscape. Haas is consistently ranked among the top business schools globally, reflecting its commitment to leadership, entrepreneurship, and impact.
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