IDEAS home Printed from
   My bibliography  Save this article

Asymmetric rotation of risk factors in a global portfolio


  • George A. Christodoulakis


Purpose - The purpose of this paper is to examine the asymmetric dynamic rotation of beta coefficients to global investment style factor shocks in the Morgan Stanley Capital International (MSCI) universe of assets and its implications for investment management. Design/methodology/approach - The paper uses an asymmetric extension of the Christodoulakis and Satchell approach of time varying beta coefficients. Findings - Evidence suggests that positive (negative) style factor shocks tend to be associated more with increases (decreases) in beta coefficients rather than the reverse. Research limitations/implications - There is a need to examine other forms of beta rotation and the degree of common persistence and empirical applications to investment management and portfolio performance attribution. Practical implications - Forecast the evolution of beta. Persistent positive or negative shocks could spark rotating investment exposures, particularly relevant during turbulent periods in which asset managers may engage onto tactical asset allocation strategies. Originality/value - The paper explores the asymmetric rotation of style factors in the MSCI universe of assets. The results can be used in applied investment management involving dynamic asset allocation strategies.

Suggested Citation

  • George A. Christodoulakis, 2008. "Asymmetric rotation of risk factors in a global portfolio," Journal of Risk Finance, Emerald Group Publishing, vol. 9(4), pages 391-403, August.
  • Handle: RePEc:eme:jrfpps:v:9:y:2008:i:4:p:391-403

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Steve Satchell & George Christodoulakis, 2002. "On th Evolution of Global Style Factors in the MSCI Universe of Assets," Working Papers wp02-07, Warwick Business School, Finance Group.
    2. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-370, March.
    3. Ross, Stephen A., 1976. "The arbitrage theory of capital asset pricing," Journal of Economic Theory, Elsevier, vol. 13(3), pages 341-360, December.
    4. Young-Hye Cho & Robert F. Engle, 1999. "Time-Varying Betas and Asymmetric Effect of News: Empirical Analysis of Blue Chip Stocks," NBER Working Papers 7330, National Bureau of Economic Research, Inc.
    5. Huberman, Gur & Kandel, Shmuel & Stambaugh, Robert F, 1987. " Mimicking Portfolios and Exact Arbitrage Pricing," Journal of Finance, American Finance Association, vol. 42(1), pages 1-9, March.
    6. Blume, Marshall E, 1975. "Betas and Their Regression Tendencies," Journal of Finance, American Finance Association, vol. 30(3), pages 785-795, June.
    7. Schwert, G William & Seguin, Paul J, 1990. " Heteroskedasticity in Stock Returns," Journal of Finance, American Finance Association, vol. 45(4), pages 1129-1155, September.
    8. Ball, Ray & Kothari, S. P., 1989. "Nonstationary expected returns : Implications for tests of market efficiency and serial correlation in returns," Journal of Financial Economics, Elsevier, vol. 25(1), pages 51-74, November.
    9. Lehmann, Bruce N. & Modest, David M., 1988. "The empirical foundations of the arbitrage pricing theory," Journal of Financial Economics, Elsevier, vol. 21(2), pages 213-254, September.
    10. Ravinder K. Bhardwaj & LeRoy D. Brooks, 1993. "Dual Betas From Bull And Bear Markets: Reversal Of The Size Effect," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 16(4), pages 269-283, December.
    11. Koutmos, Gregory & Lee, Unro & Theodossiu, Panayiotis, 1994. "Time-varying betas and volatility persistence in International Stock markets," Journal of Economics and Business, Elsevier, vol. 46(2), pages 101-112, May.
    12. Bhardwaj, Ravinder K & Brooks, LeRoy D, 1993. "Dual Betas from Bull and Bear Markets: Reversal of the Size Effect," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 16(4), pages 269-283, Winter.
    13. Hall, Anthony D. & Hwang, Soosung & Satchell, Stephen E., 2002. "Using Bayesian variable selection methods to choose style factors in global stock return models," Journal of Banking & Finance, Elsevier, vol. 26(12), pages 2301-2325.
    14. Riccardo Bramante & Giampaolo Gabbi, 2006. "Portfolio optimisation under changing risk via time-varying beta," Managerial Finance, Emerald Group Publishing, vol. 32(4), pages 337-346.
    15. Ferson, Wayne E & Korajczyk, Robert A, 1995. "Do Arbitrage Pricing Models Explain the Predictability of Stock Returns?," The Journal of Business, University of Chicago Press, vol. 68(3), pages 309-349, July.
    16. Collins, Daniel W & Ledolter, Johannes & Rayburn, Judy Dawson, 1987. "Some Further Evidence on the Stochastic Properties of Systematic Risk," The Journal of Business, University of Chicago Press, vol. 60(3), pages 425-448, July.
    17. Ferson, Wayne E & Harvey, Campbell R, 1993. "The Risk and Predictability of International Equity Returns," Review of Financial Studies, Society for Financial Studies, vol. 6(3), pages 527-566.
    18. Chan, K C, 1988. "On the Contrarian Investment Strategy," The Journal of Business, University of Chicago Press, vol. 61(2), pages 147-163, April.
    Full references (including those not matched with items on IDEAS)


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:jrfpps:v:9:y:2008:i:4:p:391-403. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.