Cerrato, Mario, Crosby, John, Kim, Minjoo ORCID: 0000-0002-5454-2257 and Zhao, Yang
(2017)
Relation between higher order comoments and dependence structure of equity portfolio.
JOURNAL OF EMPIRICAL FINANCE, 40.
pp. 101-120.
Text
Cerrato Crosby Kim Zhao JEF 2017.pdf - Author Accepted Manuscript Download (1MB) |
Abstract
We study a relation between higher order comoments and dependence structure of equity portfolio in the US and UK by relying on a simple portfolio approach where equity portfolios are sorted on the higher order comoments. We find that beta and coskewness are positively related with a copula correlation, whereas cokurtosis is negatively related with it. We also find that beta positively associates with an asymmetric tail dependence whilst coskewness negatively associates with it. Furthermore, two extreme equity portfolios sorted on the higher order comoments are closely correlated and their dependence structure is strongly time-varying and nonlinear. Backtesting results of value-at-risk and expected shortfall demonstrate the importance of dynamic modeling of asymmetric tail dependence in the risk management of extreme events.
Item Type: | Article |
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Uncontrolled Keywords: | Higher order comoments, Dependence structure, Hyperbolic generalized skewed t copula, Generalized autoregressive score, Risk management |
Depositing User: | Symplectic Admin |
Date Deposited: | 29 Oct 2018 12:26 |
Last Modified: | 19 Jan 2023 01:13 |
DOI: | 10.1016/j.jempfin.2016.11.007 |
Open Access URL: | http://eprints.gla.ac.uk/131712/ |
Related URLs: | |
URI: | https://livrepository.liverpool.ac.uk/id/eprint/3028125 |