Risk Appetite and Jumps in Realized Correlation
This paper examines the role of non-cash flow factors over correlation jumps in financial markets. Utilizing time-varying risk aversion measure as a proxy for investor sentiment and the cross-quantilogram method applied to intraday data, we show that risk aversion captures significant predictive pow...
| Main Authors: | , , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2020-12-01
|
| Series: | Mathematics |
| Subjects: | |
| Online Access: | https://www.mdpi.com/2227-7390/8/12/2255 |
| _version_ | 1797544006147637248 |
|---|---|
| author | Riza Demirer Konstantinos Gkillas Christos Kountzakis Amaryllis Mavragani |
| author_facet | Riza Demirer Konstantinos Gkillas Christos Kountzakis Amaryllis Mavragani |
| author_sort | Riza Demirer |
| collection | DOAJ |
| description | This paper examines the role of non-cash flow factors over correlation jumps in financial markets. Utilizing time-varying risk aversion measure as a proxy for investor sentiment and the cross-quantilogram method applied to intraday data, we show that risk aversion captures significant predictive power over realized stock-bond correlation jumps at different quantiles and lags. The predictive relation between correlation jumps and time-varying risk aversion is found to be asymmetric, as we detect a heterogeneous dependence pattern across different quantiles and lag orders. Our findings underline the importance of non-cash flow factors over correlation jumps, highlighting the role of behavioral factors in optimal portfolio allocations and the effectiveness of diversification strategies. |
| first_indexed | 2024-03-10T13:53:30Z |
| format | Article |
| id | doaj.art-7523c42464774f2eb1cfa6163841f745 |
| institution | Directory Open Access Journal |
| issn | 2227-7390 |
| language | English |
| last_indexed | 2024-03-10T13:53:30Z |
| publishDate | 2020-12-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Mathematics |
| spelling | doaj.art-7523c42464774f2eb1cfa6163841f7452023-11-21T01:50:57ZengMDPI AGMathematics2227-73902020-12-01812225510.3390/math8122255Risk Appetite and Jumps in Realized CorrelationRiza Demirer0Konstantinos Gkillas1Christos Kountzakis2Amaryllis Mavragani3Department of Economics and Finance, School of Business, Southern Illinois University Edwardsville, Edwardsville, IL 62026-1102, USADepartment of Management Science and Technology, University of Patras, 265 04 Patras, GreeceDepartment of Statistics and Actuarial-Financial Mathematics, School of Sciences, University of the Aegean, 832 00 Samos, GreeceDepartment of Computing Science and Mathematics, University of Stirling, Stirling FK9 4LA, UKThis paper examines the role of non-cash flow factors over correlation jumps in financial markets. Utilizing time-varying risk aversion measure as a proxy for investor sentiment and the cross-quantilogram method applied to intraday data, we show that risk aversion captures significant predictive power over realized stock-bond correlation jumps at different quantiles and lags. The predictive relation between correlation jumps and time-varying risk aversion is found to be asymmetric, as we detect a heterogeneous dependence pattern across different quantiles and lag orders. Our findings underline the importance of non-cash flow factors over correlation jumps, highlighting the role of behavioral factors in optimal portfolio allocations and the effectiveness of diversification strategies.https://www.mdpi.com/2227-7390/8/12/2255realized correlation jumpsstock-bond correlationtime-varying risk aversion |
| spellingShingle | Riza Demirer Konstantinos Gkillas Christos Kountzakis Amaryllis Mavragani Risk Appetite and Jumps in Realized Correlation Mathematics realized correlation jumps stock-bond correlation time-varying risk aversion |
| title | Risk Appetite and Jumps in Realized Correlation |
| title_full | Risk Appetite and Jumps in Realized Correlation |
| title_fullStr | Risk Appetite and Jumps in Realized Correlation |
| title_full_unstemmed | Risk Appetite and Jumps in Realized Correlation |
| title_short | Risk Appetite and Jumps in Realized Correlation |
| title_sort | risk appetite and jumps in realized correlation |
| topic | realized correlation jumps stock-bond correlation time-varying risk aversion |
| url | https://www.mdpi.com/2227-7390/8/12/2255 |
| work_keys_str_mv | AT rizademirer riskappetiteandjumpsinrealizedcorrelation AT konstantinosgkillas riskappetiteandjumpsinrealizedcorrelation AT christoskountzakis riskappetiteandjumpsinrealizedcorrelation AT amaryllismavragani riskappetiteandjumpsinrealizedcorrelation |