Asymmetric jump beta estimation with implications for portfolio risk management

Alexeev, V; Urga, G; Yao, W

Asymmetric jump beta estimation with implications for portfolio risk management

Alexeev, V

Urga, G Yao, W

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Publication Type:: Journal Article
Citation:: International Review of Economics and Finance, 2019, 62 pp. 20 - 40
Issue Date:: 2019-07-01

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Field	Value	Language
dc.contributor.author	Alexeev, V https://orcid.org/0000-0003-3092-2500	en_US
dc.contributor.author	Urga, G	en_US
dc.contributor.author	Yao, W https://orcid.org/0000-0001-6368-0160	en_US
dc.date.available	2021-08-12T19:01:04Z
dc.date.issued	2019-07-01	en_US
dc.identifier.citation	International Review of Economics and Finance, 2019, 62 pp. 20 - 40	en_US
dc.identifier.issn	1059-0560	en_US
dc.identifier.uri	http://hdl.handle.net/10453/134911
dc.description.abstract	© 2019 We evaluate the impact of extreme market shifts on equity portfolios and study the difference in negative and positive reactions to market jumps with implications for portfolio risk management. Employing high-frequency data for the constituents of the S&P500 index over the period 2 January 2003 to 30 December 2017, we investigate to what extent the portfolio exposure to the downside and upside jumps can be mitigated. We contrast the risk exposure of individual stocks with those of the portfolios as the number of holdings increases. Varying the jump identification threshold, we show that the number of holdings required to stabilise portfolios’ sensitivities to negative jumps is higher than when positive jumps are considered and that the asymmetry is more prominent for more extreme events. Ignoring this asymmetry results in under-diversification of portfolios and increases exposure to sudden extreme negative market shifts.	en_US
dc.relation.ispartof	International Review of Economics and Finance	en_US
dc.relation.isbasedon	10.1016/j.iref.2019.02.014	en_US
dc.rights	info:eu-repo/semantics/embargoedAccess
dc.subject.classification	Economics	en_US
dc.title	Asymmetric jump beta estimation with implications for portfolio risk management	en_US
dc.type	Journal Article
utslib.citation.volume	62	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
utslib.for	1401 Economic Theory	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
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Finance Discipline
utslib.copyright.status	open_access	*
pubs.publication-status	Published	en_US
pubs.volume	62	en_US

Abstract:

© 2019 We evaluate the impact of extreme market shifts on equity portfolios and study the difference in negative and positive reactions to market jumps with implications for portfolio risk management. Employing high-frequency data for the constituents of the S&P500 index over the period 2 January 2003 to 30 December 2017, we investigate to what extent the portfolio exposure to the downside and upside jumps can be mitigated. We contrast the risk exposure of individual stocks with those of the portfolios as the number of holdings increases. Varying the jump identification threshold, we show that the number of holdings required to stabilise portfolios’ sensitivities to negative jumps is higher than when positive jumps are considered and that the asymmetry is more prominent for more extreme events. Ignoring this asymmetry results in under-diversification of portfolios and increases exposure to sudden extreme negative market shifts.

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http://hdl.handle.net/10453/134911