 Conditional volatility targeting strategy considering jump effects: Evidence from sustainable ESG equity index-Wei Huang, Sharon S. Yang and Hung-Wen Cheng Pacific-Basin Finance Journal, 2024, vol. 88, issue C Abstract: This paper considers the sustainable ESG equity index in the proposed conditional volatility targeting strategy. The research first detects jump risk using a jump test and then extends Bongaerts et al. (2020) by addressing jump risk and employing different volatility models to project volatilities under the conditional volatility targeting strategy. To capture consideration of the fact that index return dynamics, we propose an ARMA-GARCH jump model that can capture the characteristics of jump persistence, autocorrelation, and volatility clustering according to the return of the sustainable equity index. Our numerical analyses reveal that the portfolio allocation using a sustainable equity index to predict volatility, combined with a conditional volatility target strategy, can achieve higher performance. Furthermore, the proposed ARMA-GARCH jump model can enhance the performance with conditional volatility targeting strategy. Keywords: Conditional volatility targeting strategy; Sustainable ESG equity index; Jump risk; ARMA-GARCH jump model (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:88:y:2024:i:c:s0927538x24002774 DOI: 10.1016/j.pacfin.2024.102525 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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