Showing 1 - 10 of 75
This paper studies the impact of EMU on portfolio diversification opportunities. We find a significant increase in the correlation between stock returns, whether they are computed on the basis of market or sector indices. This is true for two definitions of the pre-convergence and convergence...
Persistent link: https://www.econbiz.de/10005771835
Diversification opportunities in Euroland appear to have improved significantly since the advent of the euro, thus invalidating the prospects identified in the last years of the convergence-to-EMU period. We identify low frequency movements in the time series of return dispersions suggestive of...
Persistent link: https://www.econbiz.de/10005771845
According to standard theory, wealth should have no intrinsic value. Yet, conventional wisdom, recent theories, and data suggest it might. We verify whether or not households have direct preferences over wealth in selecting assets. The fully structural econometric model focuses on a multivariate...
Persistent link: https://www.econbiz.de/10005771793
To obtain the maximum benefits from diversification, financial theory suggests that investors should invest internationally because of the larger potential for risk reduction stemming from the lower correlation exisiting between assets of different countries. The question that we raise in this...
Persistent link: https://www.econbiz.de/10005264588
In this paper we discuss some statistical pitfalls that may occur in modeling cross-dependences with copulas in … financial applications. In particular we focus on issues arising in the estimation and the empirical choice of copulas as well … as in the design of time-dependent copulas. …
Persistent link: https://www.econbiz.de/10005771824
We investigate the role of real estate in a mixed-asset portfolio when the maximum drawdown (hereafter MaxDD), rather than the standard deviation, is used as the measure of risk. In particular, we analyse whether the discrepancy between the optimal allocation to real estate and the actual...
Persistent link: https://www.econbiz.de/10005771822
We consider consistent tests for stochastic dominance efficiency at any order of a given portfolio with respect to all possible portfolios constructed from a set of assets. We propose and justify approaches based on simulation and the block bootstrap to achieve valid inference in a time series...
Persistent link: https://www.econbiz.de/10005771790
Standard tests designed to identify mutual funds with non-zero alphas are problematic, in that they do not adequately account for the presence of lucky funds. Lucky funds have significant estimated alphas, while their true alphas are equal to zero. To address this issue, this paper quantifies...
Persistent link: https://www.econbiz.de/10005771795
A few recent papers have derived estimates of the representative agent's risk aversion by comparing the statistical density of asset returns and the state-price density. The implied risk aversion estimates obtained in these studies are puzzling, exhibiting (i) pronounced U-shaped patterns (a...
Persistent link: https://www.econbiz.de/10005771821
This paper addresses whether country allocation provides benefits over industry allocation in a sample of European country and industry indexes. Strategy performance is compared using a mean-variance spanning test. We find that, for investors with low risk aversion, industry allocation is as...
Persistent link: https://www.econbiz.de/10005264589