On Epps effect and rebalancing of hedged portfolio in multiple frequencies

Mustafa U. Torun, Ali Akansu

Research output: Chapter in Book/Report/Conference proceedingConference contribution

1 Scopus citations

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.

Original languageEnglish (US)
Title of host publication2011 4th IEEE International Workshop on Computational Advances in Multi-Sensor Adaptive Processing, CAMSAP 2011
Pages33-36
Number of pages4
DOIs
StatePublished - Dec 1 2011
Event2011 4th IEEE International Workshop on Computational Advances in Multi-Sensor Adaptive Processing, CAMSAP 2011 - San Juan, Puerto Rico
Duration: Dec 13 2011Dec 16 2011

Other

Other2011 4th IEEE International Workshop on Computational Advances in Multi-Sensor Adaptive Processing, CAMSAP 2011
Country/TerritoryPuerto Rico
CitySan Juan
Period12/13/1112/16/11

All Science Journal Classification (ASJC) codes

  • Computer Networks and Communications

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