Is a night better than a day: Empirical evidence

被引:0
作者
Deshkovski, A. [1 ]
Dzeshkovskaia, A. [2 ]
机构
[1] North Carolina Cent Univ, Sch Business, Durham, NC 27707 USA
[2] Princeton Univ, Princeton, NJ 08544 USA
来源
COGENT ECONOMICS & FINANCE | 2014年 / 2卷 / 01期
关键词
stock returns; symmetry; covariance; portfolio analysis;
D O I
10.1080/23322039.2014.921575
中图分类号
F [经济];
学科分类号
02 ;
摘要
In this study, we analyze the portfolio allocation based on time asymmetry of stock characteristics. In particular, we analyzed the empirical data of changes in financial stock prices during the day period and during the night period and have found that characteristics such as mean and variance are different for changes during the day and changes during the night. Also, the portfolio characteristics, such as covariance between stocks, differ on whether we take into account day changes or night changes in prices. That greatly affects the allocation of fund to the portfolio for an investor who trades frequently. The portfolio should be re-balanced every day in order to achieve optimality and much higher return. At the same level of risk the returns on this new portfolio may by several times larger than the returns on a portfolio without everyday re-balancing. We computed numerically the allocation of funds for the stocks from the finance industry and showed that the increase in returns is substantial.
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页数:11
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