Harry Markowitz introduced the Modern Portfolio Theory (MPT) for the first time in 1952 which has been applied widely for optimal portfolio selection until now. However, the theory still has some limitations that come from the instability of covariance matrix input. This leads the selected...

This paper proposes an Exponential HEAVY (EHEAVY) model. The model specifies the dynamics of returns and realized measures of volatility in an exponential form, which guarantees the positivity of volatility without restrictions on parameters and naturally allows the asymmetric effects. It...

Graphical models have shown remarkable performance in uncovering the conditional dependence structure across a set of given variables. In this paper, we introduce two new graphical modelling approaches—called Gslope and Tslope—to the portfolio selection literature for directly estimating the...

We develop estimation methods for Bayesian models where the covariance matrix has a block structure. A block covariance matrix partitions the data into groups or blocks; variances and covariances are equal within blocks while covariances are equal across blocks. We derive the posterior and...

Realized covariance matrices (RCs) are an important input to asses the risks involved in different investment allocations and it is thus useful to model and forecast them. To this end generalized autoregressive score (GAS) models are employed in this paper. These models are ideal for comparing...

This paper suggests a new approach to evaluate realized covariance (RCOV) estimators via their predictive power on return density. By jointly modeling returns and RCOV measures under a Bayesian framework, the predictive density of returns and ex-post covariance measures are bridged. The forecast...

The main aim of this empirical research was to classify the profiles of executives of Spanish companies. We classified the executives' profiles based on two key factors of innovation: knowledge management and emotional intelligence. The sample comprised study 241 executives of Spanish companies,...

This paper proposes a generalization of the class of realized semivariance and semicovariance measures introduced by Barndorff-Nielsen, Kinnebrock and Shephard (2010) and Bollerslev, Li, Patton and Quaedvlieg (2020a) to allow for a finer decomposition of realized (co)variances. The new "realized...

This paper proposes a new time-varying minimum variance portfolio (TV-MVP) in a large investment universe of assets. Our method extends the existing literature of minimum variance portfolio by allowing for time-varying factor loadings, which is the facilitator to capture the dynamics of asset...

In this paper, the concept of Income Satisfaction Inequality is operationalized on the basis of individual responses to an Income Satisfaction question posed in the German Socio-Economic Panel (GSOEP). Income satisfaction is the subjective analogue of the objective income concept and includes...

We show why considering a number of education-dependent covariates in the wage equation decreases coefficient of education in the wage equation. We use a meta-analysis of results for Portugal to show, empirically, that this is the case. The coefficient decreases when we use covariates that can...

A particular shortcoming of panel surveys is potential bias arising from selective attrition. Based on data from the German Socio-Economic Panel Study (SOEP) we analyze potential artifacts (level, structure, inequality of income) by comparing results from two independently drawn panel...

We introduce the class of affine forward variance (AFV) models of which both the conventional Heston model and the rough Heston model are special cases. We show that AFV models can be characterized by the affine form of their cumulant generating function, which can be obtained as solution of a...

The article deals with the use of experimental design in business innovation projects. Firstly, the foundations of experimental design are presented, with special emphasis on the process approach and its applicability in innovation. The second section proposes a guide for its application in...

We provide a comprehensive treatment for the problem of testing jointly for structural changes in both the regression coefficients and the variance of the errors in a single equation system involving stationary regressors. Our framework is quite general in that we allow for general mixing‐type...

We propose a novel dynamic approach to forecast the weights of the global minimum variance portfolio (GMVP). The GMVP weights are the population coefficients of a linear regression of a benchmark return on a vector of return differences. This representation enables us to derive a consistent loss...

Value at risk (VaR) and expected shortfall (ES) are two of the most widely used risk measures in economics and finance. In this paper, we use a semiparametric method, together with realized variance measures, to jointly estimate structural models for the two risk measures. The semiparametric...

Innovations in volatility constitute a potentially important asset pricing risk factor that can be tested using the return on variance swaps. We characterize the exposures of returns on equities, bonds and currencies in all regions of the world to U.S. based equity variance risk. We explore...

This paper studies the effect of variance swap in hedging volatility risk under the mean-variance criterion. We consider two mean-variance portfolio selection problems under Heston's stochastic volatility model. In the first problem, the financial market is complete and contains three primitive...

Grouped normal variance mixtures are a class of multivariate distributions that generalize classical normal variance mixtures such as the multivariate t distribution, by allowing different groups to have different (comonotone) mixing distributions. This allows one to better model risk factors...

In the banking industry, which aims to serve customers, management level and service level are one of the criteria for measuring the core competitiveness of banks. An important indicator of management and service levels is to ensure customer satisfaction with the bank used. Six Sigma management...

This paper studies the estimation of high-dimensional minimum variance portfolio (MVP) based on the high frequency returns which can exhibit heteroscedasticity and possibly be contaminated by microstructure noise. Under certain sparsity assumptions on the precision matrix, we propose estimators...

This paper examines the impact of intraday periodicity on forecasting realized volatility using a heterogeneous autoregressive model (HAR) framework. We show that periodicity inflates the variance of the realized volatility and biases jump estimators. This combined effect adversely affects...

Many financial decisions, such as portfolio allocation, risk management, option pricing and hedge strategies, are based on forecasts of the conditional variances, covariances and correlations of financial returns. The paper shows an empirical comparison of several methods to predict...

Statisticians are constantly looking for methods of statistical inference that would be both effective and would require meeting as few assumptions as possible. Permutation tests seem to fit here, as using them makes it possible to perform statistical inference in situations where classical...

This paper proposes a new class of multivariate volatility model that utilising high-frequency data. We call this model the DCC-HEAVY model as key ingredients are the Engle (2002) DCC model and Shephard and Sheppard (2012) HEAVY model. We discuss the models' dynamics and highlight their...

The distance to default (DD) and the probability of default (PD) are the essential credit risks in the finance world. It provides an estimate of the likelihood that a borrower will be unable to meet its debt obligations. It is crucial to know which parameter effects more on DD and PD so that...

In the banking industry, which aims to serve customers, management level and service level are one of the criteria for measuring the core competitiveness of banks. An important indicator of management and service levels is to ensure customer satisfaction with the bank used. Six Sigma management...

The study tests whether realised moments of stock returns (mean, variance, skewness and kurtosis) computed from daily returns over the last month, quarter and year can predict the 1-month cross-sectional stock returns of 40 US-traded liquid stocks in the period 1986-2019. The performed...

The risk return relationship is analysed in bivariate models for return and realised variance (RV) series. Based on daily time series from 21 international market indices for more than 13 years (January 2000 to February 2013), the empirical findings support the arguments of risk return tradeoff,...