On Epps effect and rebalancing of hedged portfolio in multiple frequencies

Document Type

Conference Proceeding

Publication Date

12-1-2011

Abstract

Correlations of financial asset returns play a central role in designing investment portfolios by using Markowitz's modern portfolio theory (MPT). Correlations are calculated from asset prices that happen at various trading time intervals. Therefore, trading frequency dictates correlation values. This phenomenon is called the Epps effect in finance. We present variations of correlations as a function of trading frequency to quantify Epps effect. The results reiterate that portfolio rebalancing, particularly in multiple trading frequencies, requires good estimation of correlations in order to deliver reliable hedging. © 2011 IEEE.

Identifier

84857147027 (Scopus)

ISBN

[9781457721052]

Publication Title

2011 4th IEEE International Workshop on Computational Advances in Multi Sensor Adaptive Processing Camsap 2011

External Full Text Location

https://doi.org/10.1109/CAMSAP.2011.6136020

First Page

33

Last Page

36

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