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.
Continuous GARCH; Independent Component Analysis; Irregular grids; Risk measures
Settore SECS-S/06 - Metodi mat. dell'economia e Scienze Attuariali e Finanziarie
31-mar-2021
Article (author)
File in questo prodotto:
File Dimensione Formato  
Bianchi2021_Article_PortfolioSelectionWithIrregula.pdf

accesso aperto

Descrizione: Online first
Tipologia: Publisher's version/PDF
Dimensione 5.48 MB
Formato Adobe PDF
5.48 MB Adobe PDF Visualizza/Apri
Pubblicazioni consigliate

Caricamento pubblicazioni consigliate

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/2434/878694
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 0
  • ???jsp.display-item.citation.isi??? ND
social impact