We assess the benefits of using frequency-domain information for active portfolio management. To do so, we forecast the bond risk premium and equity risk premium using a methodology that isolates frequencies (of the predictors) with the highest predictive power. The resulting forecasts are more...

Similar to the cross-sectional momentum crashes, the time series momentum experiences deep and persistent drawdowns in the stressed time of slumps in the upward momentum, rebounds in the downward momentum, and long time sideways market. We measure the upside and downside risk using the upper and...

Extending evidence from extant literature, this study finds the existence of realized skewness and momentum factors in the emerging stock market of Pakistan. Tick-by-tick data of listed firms atPakistan Stock Exchange (PSX) from 1 July 2008 to 31 August 2018 is used to generate five-minute...

The beta dispersion, which is the spread of betas on a stock market, can be interpreted as a measure of market vulnerability. This study examines the economic idea of the beta dispersion and its application as a market return predictor. Based on the empirical beta dispersion observed in the US...

We examine how extreme market risks are priced in the cross-section of asset returns at various horizons. Based on the frequency decomposition of covariance between indicator functions, we define the quantile cross-spectral beta of an asset capturing tail-specific as well as horizon-, or...

According to no-arbitrage, risk-adjusted returns should be unpredictable. Using several prominent factor models and a large cross-section of anomalies, we find that past pricing errors predict future risk-adjusted anomaly returns. We show that past pricing errors can be interpreted as deviations...

To improve the dynamic assessment of risks of speculative assets, we apply a Markov switching MGARCH approach to portfolio forecasting. More specifically, we take advantage of the flexible Markov switching copula multivariate GARCH (MS-C-MGARCH) model of Fülle and Herwartz (2021). As an...

We investigate the direct connection between the uncertainty related to estimated stable ratios of stock prices and risk and return of two pairs trading strategies: a conditional statistical arbitrage method and an implicit arbitrage one. A simulation-based Bayesian procedure is introduced for...

Investors sometimes have strong convictions that a distinctive economic regime will prevail in the period ahead and therefore would like to form a portfolio that reflects the expected returns, standard deviations, and correlations of assets during such a regime. To do so, they typically isolate...

The paper provides an introductory guide for active managers that illustrates econometric techniques for alpha generation in active asset management. For modelling stock market returns three different model types are discussed: (i) fair value models that identify over- and undervaluations, (ii)...