Portfolio analysis of intraday covariance matrix in the Greek equity market

Vortelinos, Dimitrios (2013) Portfolio analysis of intraday covariance matrix in the Greek equity market. Research in International Business and Finance, 27 (1). pp. 66-79. ISSN 0275-5319

Full content URL: http://dx.doi.org/10.1016/j.ribaf.2012.06.003

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Item Type:Article
Item Status:Live Archive

Abstract

The intraday nonparametric estimation of the variance covariance matrix adds to the literature in portfolio analysis of the Greek equity market. This paper examines the economic value of various realized volatility and covariance estimators under the strategy of volatility timing. I use three types of portfolios: Global Minimum Variance, Capital Market Line and Capital Market Line with only positive weights. The estimators of volatilities and covariances use 5-min high-frequency intraday data. The dataset concerns the FTSE/ATHEX Large Cap index, FTSE/ATHEX Mid Cap index, and the FTSE/ATHEX Small Cap index of the Greek equity market (Athens Stock Exchange). As far as I know, this is the first work of its kind for the Greek equity market. Results concern not only the comparison of various estimators but also the comparison of different types of portfolios, in the strategy of volatility timing. The economic value of the contemporary non-parametric realized volatility estimators is more significant than this when the covariance is estimated by the daily squared returns. Moreover, the economic value (in b.p.s) of each estimator changes with the volatility timing.

Keywords:Portfolio analysis, Covariance, Volatility timing, Realized volatility, Greece
Subjects:L Social studies > L140 Econometrics
N Business and Administrative studies > N300 Finance
N Business and Administrative studies > N341 Financial Risk
N Business and Administrative studies > N321 Investment
L Social studies > L111 Financial Economics
Divisions:Lincoln International Business School
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ID Code:7423
Deposited On:05 Feb 2013 22:21

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