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Spillovers and Asset Allocation

Author

Listed:
  • Lai T. Hoang

    (UWA Business School, The University of Western Australia, Crawley, WA 6009, Australia)

  • Dirk G. Baur

    (UWA Business School, The University of Western Australia, Crawley, WA 6009, Australia)

Abstract

There is a large and growing literature on spillovers but no study that systematically evaluates the importance of spillovers for portfolio management. This paper provides such an analysis and demonstrates that spillovers are fully embedded in estimates of expected returns, variances, and correlations and that estimation of spillovers is not necessary for asset allocation. Simulations of typical empirical spillover settings further show that same-frequency spillovers are often negligible and spurious.

Suggested Citation

  • Lai T. Hoang & Dirk G. Baur, 2021. "Spillovers and Asset Allocation," JRFM, MDPI, vol. 14(8), pages 1-31, July.
    • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:8:p:345-:d:602714
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    References listed on IDEAS

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