Article
Details
Citation
Demirer R, Gkillas K, Kountzakis C & Mavragani A (2020) Risk appetite and jumps in realized correlation. Mathematics, 8 (12), Art. No.: 2255. https://doi.org/10.3390/math8122255
Abstract
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.
Keywords
realized correlation jumps; stock-bond correlation; time-varying risk aversion
Journal
Mathematics: Volume 8, Issue 12
Status | Published |
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Publication date | 31/12/2020 |
Publication date online | 21/12/2020 |
Date accepted by journal | 15/12/2020 |
URL | |
eISSN | 2227-7390 |