Spillovers and Asset Allocation

Spillovers and Asset Allocation

There is a large and growing literature on spillovers but no study that systematically evaluates the importance of spillovers for portfolio management. This paper provides such an analysis and demonstrates that spillovers are fully embedded in estimates of expected returns, variances, and correlatio...

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Bibliographic Details
Main Authors: Lai T. Hoang, Dirk G. Baur
Format: Article
Language:English
Published: MDPI AG 2021-07-01
Series:Journal of Risk and Financial Management
Subjects:
spillover
return spillovers
volatility spillovers
portfolio optimization
asset allocation
Online Access:https://www.mdpi.com/1911-8074/14/8/345
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spelling doaj-23f9c1795e2a4d16836d8666bb12416b2021-08-26T13:58:14ZengMDPI AGJournal of Risk and Financial Management1911-80661911-80742021-07-011434534510.3390/jrfm14080345Spillovers and Asset AllocationLai T. Hoang0Dirk G. Baur1UWA Business School, The University of Western Australia, Crawley, WA 6009, AustraliaUWA Business School, The University of Western Australia, Crawley, WA 6009, AustraliaThere is a large and growing literature on spillovers but no study that systematically evaluates the importance of spillovers for portfolio management. This paper provides such an analysis and demonstrates that spillovers are fully embedded in estimates of expected returns, variances, and correlations and that estimation of spillovers is not necessary for asset allocation. Simulations of typical empirical spillover settings further show that same-frequency spillovers are often negligible and spurious.https://www.mdpi.com/1911-8074/14/8/345spilloverreturn spilloversvolatility spilloversportfolio optimizationasset allocation
collection DOAJ
language English
format Article
sources DOAJ
author Lai T. Hoang
Dirk G. Baur
spellingShingle Lai T. Hoang
Dirk G. Baur
Spillovers and Asset Allocation
Journal of Risk and Financial Management
spillover
return spillovers
volatility spillovers
portfolio optimization
asset allocation
author_facet Lai T. Hoang
Dirk G. Baur
author_sort Lai T. Hoang
title Spillovers and Asset Allocation
title_short Spillovers and Asset Allocation
title_full Spillovers and Asset Allocation
title_fullStr Spillovers and Asset Allocation
title_full_unstemmed Spillovers and Asset Allocation
title_sort spillovers and asset allocation
publisher MDPI AG
series Journal of Risk and Financial Management
issn 1911-8066
1911-8074
publishDate 2021-07-01
description There is a large and growing literature on spillovers but no study that systematically evaluates the importance of spillovers for portfolio management. This paper provides such an analysis and demonstrates that spillovers are fully embedded in estimates of expected returns, variances, and correlations and that estimation of spillovers is not necessary for asset allocation. Simulations of typical empirical spillover settings further show that same-frequency spillovers are often negligible and spurious.
topic spillover
return spillovers
volatility spillovers
portfolio optimization
asset allocation
url https://www.mdpi.com/1911-8074/14/8/345
work_keys_str_mv AT laithoang spilloversandassetallocation
AT dirkgbaur spilloversandassetallocation
_version_ 1721192131121381376

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