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Unsmoothing smoothed return series for risk management and asset allocation
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Authors
Author (Corporation)
Publication date
2024
Typ of student thesis
Course of study
Type
01A - Journal article
Editors
Editor (Corporation)
Supervisor
Parent work
Journal of Alternative Investments
Special issue
DOI of the original publication
Link
Series
Series number
Volume
26
Issue / Number
4
Pages / Duration
27-50
Patent number
Publisher / Publishing institution
Portfolio Management Research
Place of publication / Event location
London
Edition
Version
Programming language
Assignee
Practice partner / Client
Abstract
Smoothed returns that can occur as a result of an appraisal-based valuation process distort asset characteristics and, in particular, volatility and correlations. Using a simple but often-used model for smoothed return series, this article analyzes what unsmoothing techniques can achieve with respect to uncovering the true time-series properties. The properties of interest are volatility, autocorrelation, self-correlation, and cross-asset cor- relation. It is shown that, specifically for heavily smoothed return series, volatility estimates might overstate the true volatility, and cross-asset correlations cannot fully be recovered.
Keywords
Subject (DDC)
Event
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Date of the last check
ISBN
ISSN
1520-3255
2168-8435
2168-8435
Language
English
Created during FHNW affiliation
Yes
Strategic action fields FHNW
Publication status
Published
Review
Peer review of the complete publication
Open access category
Closed
License
Citation
Frei, C. (2024). Unsmoothing smoothed return series for risk management and asset allocation. Journal of Alternative Investments, 26(4), 27–50. https://doi.org/10.3905/jai.2024.1.210