Relation between higher order comoments and dependence structure of equity portfolio

Cerrato, M; Crosby, J; Kim, M; Zhao, Y

Relation between higher order comoments and dependence structure of equity portfolio

Cerrato, M Crosby, J

Kim, M Zhao, Y

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Publication Type:: Journal Article
Citation:: Journal of Empirical Finance, 2017, 40 pp. 101 - 120
Issue Date:: 2017-01-01

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Field	Value	Language
dc.contributor.author	Cerrato, M	en_US
dc.contributor.author	Crosby, J https://orcid.org/0000-0003-4179-9464	en_US
dc.contributor.author	Kim, M	en_US
dc.contributor.author	Zhao, Y	en_US
dc.date.issued	2017-01-01	en_US
dc.identifier.citation	Journal of Empirical Finance, 2017, 40 pp. 101 - 120	en_US
dc.identifier.issn	0927-5398	en_US
dc.identifier.uri	http://hdl.handle.net/10453/124413
dc.description.abstract	© 2016 Elsevier Ltd We study a relation between higher order comoments and dependence structure of equity portfolio in the US and UK by relying on a simple portfolio approach where equity portfolios are sorted on the higher order comoments. We find that beta and coskewness are positively related with a copula correlation, whereas cokurtosis is negatively related with it. We also find that beta positively associates with an asymmetric tail dependence whilst coskewness negatively associates with it. Furthermore, two extreme equity portfolios sorted on the higher order comoments are closely correlated and their dependence structure is strongly time-varying and nonlinear. Backtesting results of value-at-risk and expected shortfall demonstrate the importance of dynamic modeling of asymmetric tail dependence in the risk management of extreme events.	en_US
dc.relation.ispartof	Journal of Empirical Finance	en_US
dc.relation.isbasedon	10.1016/j.jempfin.2016.11.007	en_US
dc.subject.classification	Finance	en_US
dc.title	Relation between higher order comoments and dependence structure of equity portfolio	en_US
dc.type	Journal Article
utslib.citation.volume	40	en_US
utslib.for	1403 Econometrics	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
utslib.copyright.status	closed_access
pubs.publication-status	Published	en_US
pubs.volume	40	en_US

Abstract:

© 2016 Elsevier Ltd We study a relation between higher order comoments and dependence structure of equity portfolio in the US and UK by relying on a simple portfolio approach where equity portfolios are sorted on the higher order comoments. We find that beta and coskewness are positively related with a copula correlation, whereas cokurtosis is negatively related with it. We also find that beta positively associates with an asymmetric tail dependence whilst coskewness negatively associates with it. Furthermore, two extreme equity portfolios sorted on the higher order comoments are closely correlated and their dependence structure is strongly time-varying and nonlinear. Backtesting results of value-at-risk and expected shortfall demonstrate the importance of dynamic modeling of asymmetric tail dependence in the risk management of extreme events.

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http://hdl.handle.net/10453/124413