On the Gains of Using High Frequency Data in Portfolio Selection

Rui Pedro Brito, Helder Sebastião and Pedro Godinho
Authors registered in the RePEc Author Service: Helder Miguel Correia Virtuoso Sebastião

Scientific Annals of Economics and Business (continues Analele Stiintifice), 2018, vol. 65, issue 4, 365 - 383

Abstract: This paper analyzes empirically the performance gains of using high frequency data in portfolio selection. Assuming Constant Relative Risk Aversion (CRRA) preferences, with different relative risk aversion levels, we compare low and high frequency portfolios within mean-variance, mean-variance-skewness and mean-variance-skewness-kurtosis frameworks. Using data on fourteen stocks of the Euronext Paris, from January 1999 to December 2005, we conclude that the high frequency portfolios outperform the low frequency portfolios for every out-of-sample measure, irrespectively to the relative risk aversion coefficient considered. The empirical results also suggest that for moderate relative risk aversion the best performance is always achieved through the jointly use of the realized variance, skewness and kurtosis. This claim is reinforced when trading costs are taken into account. JEL Codes - C55; C61; G11

Keywords: Portfolio selection; utility maximization criteria; higher moments; high frequency data (search for similar items in EconPapers)
Date: 2018
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Journal Article: On the Gains of Using High Frequency Data in Portfolio Selection (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:aic:saebjn:v:65:y:2018:i:4:p:365-383:n:124

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