Asset Allocation and International Investments (Finance and Capital Markets)

265 Pages·2007·1.5 MB·English

by  Greg N. Gregoriou

Asset Allocation and
International Investments
Edited by
Greg N. Gregoriou
ASSET ALLOCATION AND INTERNATIONAL
INVESTMENTS
AlsoeditedbyGregN.Gregoriou
ADVANCESINRISKMANAGEMENT
DIVERSIFICATIONANDPORTFOLIOMANAGEMENTOFMUTUALFUNDS
PERFORMANCEOFMUTUALFUNDS
Asset Allocation and
International
Investments
Edited by
GREG N. GREGORIOU
Selectionandeditorialmatter©GregN.Gregoriou2007
Individualchapters©contributors2007
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Assetallocationandinternationalinvestments/editedbyGergN.Gregoriou.
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ISBN0–230–01917–X
1.Assetallocation.2.Investments,Foreign.3.Globalization—Economicaspects.
4.Portfoliomanagement.I.Gregoriou,GregN.,1956–II.Series.
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Contents
Acknowledgments xi
NotesontheContributors xii
Introduction xvii
1 Time-Varying Downside Risk: An Application
to the Art Market 1
RachelCampbellandRomanKräussl
1.1 Introduction 1
1.2 Artasaninvestment 3
1.3 Previousempiricalstudies 4
1.4 Empiricalanalysis 5
1.5 Data 6
1.6 Methodology 9
1.7 Results 10
1.8 Discussion 11
1.9 Conclusion 13
2 International Stock Portfolios and Optimal
Currency Hedging with Regime Switching 16
MarkusLeippoldandFelixMorger
2.1 Introduction 16
2.2 Themodel 18
2.3 Estimationresults 21
2.4 Discussion 26
2.5 Conclusion 39
vii
viii CONTENTS
3 The Determinants of Domestic and Foreign Biases:
An Empirical Study 42
FathiAbidandSlahBahloul
3.1 Introduction 42
3.2 Theoreticalframeworkofdomesticandforeignbiases 44
3.3 Dataandpreliminarystatistics 46
3.4 Thedeterminantsofdomesticandforeignbiases 56
3.5 Theempiricalanalysis 67
3.6 Additionaltests 71
3.7 Conclusion 74
4 The Critical Line Algorithm for UPM–LPM Parametric
General Asset Allocation Problem with Allocation
Boundaries and Linear Constraints 80
DenisaCumova,DavidMorenoandDavidNawrocki
4.1 Introduction 80
4.2 Theupsidepotential–downsideriskportfoliomodel 82
4.3 Anempiricalexample 92
4.4 Conclusion 94
5 Currency Crises, Contagion and Portfolio Selection 96
ArindamBandopadhyayaandSushmitaNagarajan
5.1 Introduction 96
5.2 Stockmarketaverageratesofreturnandaveragevolatility 97
5.3 Stockmarketcorrelations 99
5.4 Portfolioperformance 100
5.5 Conclusion 101
6 Bond and Stock Market Linkages: The Case of
Mexico and Brazil 103
ArindamBandopadhyaya
6.1 Introduction 103
6.2 Theestimationequationsanddata 105
6.3 Results 109
6.4 Conclusion 112
7 The Australian Stock Market: An Empirical
Investigation 114
AdelineChanandJ.Wickramanayake
7.1 Introduction 114
7.2 Existingevidence 115
7.3 Hypothesis 118
CONTENTS ix
7.4 Thedata 119
7.5 Dataanalysisandresults 127
7.6 Conclusion 132
8 The Price of Efficiency – So, What Do You Think About
Emerging Markets? 137
ZsoltBerényi
8.1 Introduction 137
8.2 Highermomentperformanceanalysis–thetheory 138
8.3 Theefficiencygain/lossmethodology 140
8.4 Testingresults 143
8.5 Conclusion 149
9 Liquidity and Market Efficiency Before and
After the Introduction of Electronic Trading at
the Sydney Futures Exchange 151
MarkBurgessandJ.Wickramanayake
9.1 Introduction 151
9.2 Reviewoftheliterature 152
9.3 Optionsdatavolumeasaproxyforliquidity 154
9.4 Sampledesign 159
9.5 Analysisofresults 165
9.6 Conclusion 178
10 How Does Systematic Risk Impact Stocks?
A Study of the French Financial Market 183
HayetteGatfaoui
10.1 Introduction 183
10.2 Theoreticalframework 185
10.3 Empiricalstudy 187
10.4 Theimpactofsystematicrisk 190
10.5 Furtherinvestigation 195
10.6 Marketbenchmarkcomparison 201
10.7 Conclusion 209
11 Matrix Elliptical Contoured Distributions versus a
Stable Model: Application to Daily Stock Returns of
Eight Stock Markets 214
TarasBodnarandWolfgangSchmid
11.1 Introduction 214
11.2 Smallsampletests 216
11.3 Analysisofthepowerfunctions 221
11.4 Empiricalstudy 222
11.5 Conclusion 224