Volatility timing : how best to forecast portfolio exposures
This paper investigates how best to forecast optimal portfolio weights in the context of a volatility timing strategy. It measures the economic value of a number of methods for forming optimal portfolios on the basis of realized volatility. These include the traditional econometric approach of forming portfolios from forecasts of the covariance matrix, and a novel method, where a time series of optimal portfolio weights are constructed from observed realized volatility and directly forecast. The approach proposed here of directly forecasting portfolio weights shows a great deal of merit. Resulting portfolios are of equivalent economic benefit to a number of competing approaches and are more stable across time. These findings have obvious implications for the manner in which volatility timing is undertaken in a portfolio allocation context.
Impact and interest:
Citation counts are sourced monthly from and citation databases.
These databases contain citations from different subsets of available publications and different time periods and thus the citation count from each is usually different. Some works are not in either database and no count is displayed. Scopus includes citations from articles published in 1996 onwards, and Web of Science® generally from 1980 onwards.
Citations counts from theindexing service can be viewed at the linked Google Scholar™ search.
Full-text downloads displays the total number of times this work’s files (e.g., a PDF) have been downloaded from QUT ePrints as well as the number of downloads in the previous 365 days. The count includes downloads for all files if a work has more than one.
|Item Type:||Journal Article|
|Keywords:||Volitility, Utility, Portfolio allocation, Realized volitility, MIDAS|
|Divisions:||Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
|Copyright Owner:||Copyright 2013 Elsevier B.V.|
|Copyright Statement:||NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Empirical Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Empirical Finance, [Volume 24, (December 2013)] DOI: 10.1016/j.jempfin.2013.09.004|
|Deposited On:||03 Dec 2013 22:39|
|Last Modified:||07 Dec 2016 04:22|
Repository Staff Only: item control page