Short‐run wavelet‐based covariance regimes for applied portfolio management

Berger, Theo; Gençay, Ramazan

doi:10.1002/for.2650

Cited by 6 publications

(4 citation statements)

References 29 publications

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“…We show that the different investment planning horizons can change the portfolio strategies as Ibragimov et al (2011) and Chakrabarty et al (2015). A view that focuses on short fluctuations, with the use of dealing strategies in short-term scales, can also result in a portfolio with considerable profits as Zhang et al (2016), Baralis et al (2017) and Berger and Gençay (2019) suggests.…”

Section: Final Remarksmentioning

confidence: 92%

“…( 2016 ), Baralis et al. ( 2017 ) and Berger and Gençay ( 2019 ) suggests.…”

Section: Final Remarksmentioning

confidence: 94%

“…The significance of this analysis lies in considering the impact of the time horizons of investment rules on the portfolio analysis, measuring asymmetric dependence in different timescales. The time horizons of economic decisions are related to the stock price changes, then different temporal frequencies (scales) of a returns series are useful to capture subjacent financial information from these data, as seen by Jammazi and Reboredo (2016), Shah et al (2018), Biage (2019) and Berger and Gençay (2019). This multiscale financial behavior can be captured applying the wavelet decomposition, which enables to identify the trend in different periods of time and to locate the relevant oscillation moments (Crowley 2007;Gallegati 2014).…”

Section: Introductionmentioning

confidence: 99%

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Asymmetric dependence of intraday frequency components in the Brazilian stock market

et al. 2021

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The multivariate dependence plays an important role in financial instrument management. Due to the inherent characteristics in the financial market, such as heavy tails in the returns unconditional distribution and asymmetry between gain and loss, we obtained the asymmetric dependence structure in different short-term variation scales based on the wavelet technique MODWT. The study sought to capture the relations between financial returns represented by its frequency components. Intraday returns series was used in the 15-min sampling interval from stocks and applied the D-Vine pair-copula to decompose in trade frequencies of 15 min, 1 h, 1 day, and 1 week with margin adjustments of ARIMA-APARCH class and BB7 copula function, responsible for measuring the dependence on tails. The results indicated the prevalence of a high dependence during market upturns, rising over the analyzed frequencies. Being an important tool in financial management and allowing short-term strategies of diversification.

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Section: Final Remarksmentioning

confidence: 92%

“…( 2016 ), Baralis et al. ( 2017 ) and Berger and Gençay ( 2019 ) suggests.…”

Section: Final Remarksmentioning

confidence: 94%

Section: Introductionmentioning

confidence: 99%

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Asymmetric dependence of intraday frequency components in the Brazilian stock market

et al. 2021

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“…3. Another interesting approach is to distinguish newly embedded news from (less relevant) long-run information by decomposing return series via wavelet transformation (see Berger and Gençay, 2020).…”

Section: Notesmentioning

confidence: 99%

A comparison of minimum variance and maximum Sharpe ratio portfolios for mainstream investors

Vinzelberg

Auer

2022

JRF

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PurposeMotivated by the recent theoretical rehabilitation of mean-variance analysis, the authors revisit the question of whether minimum variance (MinVar) or maximum Sharpe ratio (MaxSR) investment weights are preferable in practical portfolio formation.Design/methodology/approachThe authors answer this question with a focus on mainstream investors which can be modeled by a preference for simple portfolio optimization techniques, a tendency to cling to past asset characteristics and a strong interest in index products. Specifically, in a rolling-window approach, the study compares the out-of-sample performance of MinVar and MaxSR portfolios in two asset universes covering multiple asset classes (via investable indices and their subindices) and for two popular input estimation methods (full covariance and single-index model).FindingsThe authors find that, regardless of the setting, there is no statistically significant difference between MinVar and MaxSR portfolio performance. Thus, the choice of approach does not matter for mainstream investors. In addition, the analysis reveals that, contrary to previous research, using a single-index model does not necessarily improve out-of-sample Sharpe ratios.Originality/valueThe study is the first to provide an in-depth comparison of MinVar and MaxSR returns which considers (1) multiple asset classes, (2) a single-index model and (3) state-of-the-art bootstrap performance tests.

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Enduring relief or fleeting respite? Bitcoin as a hedge and safe haven for the US dollar

Conlon,

Corbet,

McGee

2024

Ann Oper Res

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Can technology protect investors from extreme losses? This paper investigates the short- and long-run hedging and safe haven properties of Bitcoin for the US dollar over the period 2010–2023, incorporating the COVID-19-related market turmoil. Our findings reveal that (i) Bitcoin acts as a strong hedge for all US dollar currency pairs examined, (ii) Bitcoin functions as a weak safe haven for the US dollar at short investment horizons, as indicated by a limited relationship during acute negative price movements, (iii) Bitcoin, instead of acting as a safe haven may, instead, increase aggregate risk at long horizons during periods of extreme losses. The analysis, performed using a series of horizon-dependent econometric tests, provides evidence of some US dollar risk-reduction benefits from Bitcoin but limited potential for enduring relief from long-run extreme negative US dollar rate movements.

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Short‐run wavelet‐based covariance regimes for applied portfolio management

Cited by 6 publications

References 29 publications

Asymmetric dependence of intraday frequency components in the Brazilian stock market

Asymmetric dependence of intraday frequency components in the Brazilian stock market

A comparison of minimum variance and maximum Sharpe ratio portfolios for mainstream investors

Enduring relief or fleeting respite? Bitcoin as a hedge and safe haven for the US dollar

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