Wavelet timescales and conditional relationship between higher-order systematic co-moments and portfolio returns: evidence in Australian data

Don Galagedera and Elizabeth Maharaj ()

No 16/04, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: This paper investigates association between portfolio returns and higher-order systematic co-moments at different timescales obtained through wavelet multi-scaling- a technique that decomposes a given return series into different timescales enabling investigation at different return intervals. For some portfolios, the relative risk positions indicated by systematic co-moments at higher timescales is different from those revealed in raw returns. A strong positive (negative) linear association between beta and co-kurtosis and portfolio return in the up (down) market is observed in raw returns and at different timescales. The beta risk is priced in the up and down markets and the co-kurtosis is not. Co-skewness does not appear to be linearly associated with portfolio returns even after the up and down market split and is not priced.

Keywords: Wavelet multi-scaling; higher-order systematic co-moments; asset pricing (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2004-10
New Economics Papers: this item is included in nep-fin
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Working Paper: Wavelet timescales and conditional relationship between higher- order systematic co-moments and portfolio returns: evidence in Australian data (2004)
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