Development of an econometric model for dynamic management of recession risk in equity portfolios : construction of an empirical measure of time-varying recession risk : estimation of cross-sectional differences in recession risk exposure among equities and associated differences in risk premia
Recessions are an inherent part of economic cycles. During the last decade we have experienced two extended periods of significant economic slowdown accompanied by major downturns in most of the asset classes and especially in equities. Investors during recessions suffer from severe losses and diversification does not provide the optimal solution. Through the development of an econometric model for dynamic management of recession risk in equity portfolios based on an empirical measure of timevarying recession risk, I plan to estimate cross-sectional differences in recession risk exposure among equities and associated differences in risk premia. The analysis is expanded on an industry level, where among industries clear patterns are identified in terms recession risk exposure. In the last part of the report I explore the possibility of creating a trading strategy which is able to generate significant performance benefiting from the market underreaction to recession risk.
Alternative title: | Construction of an empirical measure of time-varying recession risk Estimation of cross-sectional differences in recession risk exposure among equities and associated differences in risk premia |
---|---|
Year of publication: |
2011-10-04
|
Authors: | Chousakos, Kyriakos |
Other Persons: | Leonid Kogan. (contributor) |
Institutions: | Sloan School of Management. Master of Finance Program. (contributor) |
Publisher: |
Massachusetts Institute of Technology |
Subject: | Sloan School of Management. Master of Finance Program |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Makarov, Igor, (2006)
-
Leonid Kogan., (2007)
-
A dynamic term structure model of Central Bank policy
Staker, Shawn W, (2009)
- More ...