Volatility-related exchange traded assets: an econometric investigation

Enrique Sentana and Mencía, Javier
Authors registered in the RePEc Author Service: Javier Mencia ()

No 10444, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We compare Semi-Nonparametric expansions of the Gamma distribution with alternative Laguerre expansions, showing that they substantially widen the range of feasible moments of positive random variables. Then, we combine those expansions with a component version of the Multiplicative Error Model to capture the mean reversion typical in positive but stationary financial time series. Finally, we carry out an empirical application in which we compare various asset allocation strategies for Exchange Traded Notes tracking VIX futures indices, which are increasingly popular but risky financial instruments. We show the superior performance of the strategies based on our econometric model.

Keywords: Density expansions; Exchange traded notes; Multiplicative error model; Volatility index futures (search for similar items in EconPapers)
JEL-codes: G13 (search for similar items in EconPapers)
Date: 2015-03
New Economics Papers: this item is included in nep-ecm and nep-mfd
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Related works:
Journal Article: Volatility-Related Exchange Traded Assets: An Econometric Investigation (2018)
Working Paper: Volatility-related exchange traded assets: an econometric investigation (2015)
Working Paper: Volatility-Related Exchange Traded Assets: An Econometric Investigation (2015)
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