Dynamic Autocorrelation and International Portfolio Allocation

Jyri Kinnunen, Minna Martikainen

Forskningsoutput: TidskriftsbidragArtikelVetenskapligPeer review

Sammanfattning

We explore the relevance of dynamic autocorrelation in modeling expected returns and allocating funds between developed and emerging stock markets. Using stock market data for the US and Latin America, we find that autocorrelation in monthly returns vary with conditional volatility, implying some investors implement feedback trading strategies. Dynamic autocorrelation models fit the data considerably better than a conditional version of the zero-beta CAPM, while differences between models with an autoregressive term are modest. Investors can improve their portfolio optimization between developed and emerging stock markets by considering time-varying autocorrelation. The most drastic difference in portfolio performance is not due to allowing autocorrelation to vary over time, but realizing that stock returns are autocorrelated, especially in emerging stock markets.
OriginalspråkEngelska
Referentgranskad vetenskaplig tidskriftMultinational Finance Journal
Volym21
Utgåva1
Sidor (från-till)21-48
Antal sidor28
ISSN1096-1879
StatusPublicerad - 24.09.2018
MoE-publikationstypA1 Originalartikel i en vetenskaplig tidskrift

Nyckelord

  • 512 Företagsekonomi

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