Intraday return predictability, portfolio maximisation, and hedging

Paresh Narayan () and Susan Sharma

Emerging Markets Review, 2016, vol. 28, issue C, 105-116

Abstract: We examine whether intraday Chinese return predictability is linked to optimal portfolio holding and hedging. We find that: (1) S&P500 futures returns only predict Chinese spot market returns in up to 5-minute of trading with predictability disappearing at higher frequencies of trade; (2) the portfolio weight is maximised at the 5-minute trading frequency, when predictability is the strongest; and (3) when predictability is the strongest, significantly less shorting of the futures is required to minimise risk when a long position is taken in the Chinese market.

Keywords: Futures; Chinese stock returns; Predictability; Intraday data (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:28:y:2016:i:c:p:105-116

DOI: 10.1016/j.ememar.2016.08.017

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