In this paper we consider a portfolio selection problem defined for irregularly spaced observations. We use the Independent Component Analysis for the identification of the dependence structure and continuous-time GARCH models for the marginals. We discuss both estimation and simulation of market prices in a context where the time grid of price quotations differs across assets. We present an empirical analysis of the proposed approach using two high-frequency datasets that provides better out-of-sample results than competing portfolio strategies except for the case of severe market conditions with frequent rebalancements.
Portfolio Selection with Irregular Time Grids: an example using an ICA-COGARCH(1, 1) approach / F. Bianchi, L. Mercuri, E. Rroji. - In: FINANCIAL MARKETS AND PORTFOLIO MANAGEMENT. - ISSN 1934-4554. - (2021). [Epub ahead of print] [10.1007/s11408-021-00387-3]
Portfolio Selection with Irregular Time Grids: an example using an ICA-COGARCH(1, 1) approach
L. Mercuri
;
2021
Abstract
In this paper we consider a portfolio selection problem defined for irregularly spaced observations. We use the Independent Component Analysis for the identification of the dependence structure and continuous-time GARCH models for the marginals. We discuss both estimation and simulation of market prices in a context where the time grid of price quotations differs across assets. We present an empirical analysis of the proposed approach using two high-frequency datasets that provides better out-of-sample results than competing portfolio strategies except for the case of severe market conditions with frequent rebalancements.File | Dimensione | Formato | |
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