Spillovers and Asset Allocation

Lai T. Hoang and Dirk G. Baur
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Lai T. Hoang: UWA Business School, The University of Western Australia, Crawley, WA 6009, Australia
Dirk G. Baur: UWA Business School, The University of Western Australia, Crawley, WA 6009, Australia

JRFM, 2021, vol. 14, issue 8, 1-31

Abstract: There is a large and growing literature on spillovers but no study that systematically evaluates the importance of spillovers for portfolio management. This paper provides such an analysis and demonstrates that spillovers are fully embedded in estimates of expected returns, variances, and correlations and that estimation of spillovers is not necessary for asset allocation. Simulations of typical empirical spillover settings further show that same-frequency spillovers are often negligible and spurious.

Keywords: spillover; return spillovers; volatility spillovers; portfolio optimization; asset allocation (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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