Asset allocation in the Athens Stock Exchange: A variance sensitivity analysis
AbstractThis paper provides an analysis of asset allocation using univariate portfolio GARCH models from the Athens Stock Exchange. We use daily data for the period January 1997 to February 2005. Our analysis adopts the methodology due to Manganelli (2004) and we are able to recover from the univariate approach the multivariate dimension of the portfolio allocation problem. Manganelli (2004) suggests that such a dual problem can be solved with the application of a variance sensitivity analysis which considers the change in the portfolio variance induced by an infinitesimal change in the portfolio allocation. Our main findings are based on the estimation of the variance sensitivity for a portfolio of two assets and the way sensitivity has been changing over time and this has implications for risk management. In addition we compute the second derivative of the estimated variance with respect to portfolio weights and this gives an indication of the benefits arising from diversification at any given point of time.
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Bibliographic InfoPaper provided by University of Crete, Department of Economics in its series Working Papers with number 0602.
Length: 27 pages
Date of creation: Feb 2006
Date of revision:
asset allocation; GARCH models; risk management; sensitivity analysis;
Other versions of this item:
- Panayiotis F. Diamandis & Anastassios A. Drakos & Georgios P. Kouretas & Leonidas P. Zarangas, 2012. "Asset allocation in the Athens stock exchange: a variance sensitivity analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 17(2), pages 167-181, 04.
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-07 (All new papers)
- NEP-CFN-2006-10-07 (Corporate Finance)
- NEP-FIN-2006-10-07 (Finance)
- NEP-FMK-2006-10-07 (Financial Markets)
- NEP-RMG-2006-10-07 (Risk Management)
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