Unsmoothing smoothed return series for risk management and asset allocation
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Authors
Author (Corporation)
Publication date
2024
Type of student thesis
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Type
01A - Journal article
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Parent work
Journal of Alternative Investments
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DOI of the original publication
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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
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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.
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ISBN
ISSN
1520-3255
2168-8435
2168-8435
Language
English
Created during FHNW affiliation
Yes
Strategic action fields FHNW
Publication status
Published
Review
peer-reviewed
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