The International Portfolio Diversification under Extreme Markets
| Autor: | Hsiu-lin Lin, 林秀璘 |
|---|---|
| Rok vydání: | 2007 |
| Druh dokumentu: | 學位論文 ; thesis |
| Popis: | 95 The main purpose of this study is to investigate the correlations across international portfolios and their diversification benefits in extreme market conditions. This study measures the extreme return correlations between international portfolios,including Asian emerging market portfolio, BRICs portfolio and developed market portfolio, using portfolio value at risk (VaR) and plots the 95 percent confidence intervals for the conditional correlations. Empirical evidence shows while conditional correlations across international portfolios are higher under extreme market conditions,the conditional correlation between emerging stock market portfolios and developed market portfolio is low, especially, the portfolio containing BRICs produces the lowest correlation. This result implies that investors could avoid the downside risk and thus improve the benefit of portfolio diversification through portfolios constructed out of Asian emerging stock markets and BRICs stock index. However, the confidence interval of return correlation is getting wide at extreme confidence level, implies that conditional correlation is hard to predict accurately. In this study, we simply use quantile of the portfolio returns to estimate conditional correlation. This approach avoids size-dependent bias so that the empirical result is valuable to investors and money managers. |
| Databáze: | Networked Digital Library of Theses & Dissertations |
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