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Essays on Financial Econometrics and Forecasting

Kynigakis, Iason (2019) Essays on Financial Econometrics and Forecasting. Doctor of Philosophy (PhD) thesis, University of Kent,. (Access to this publication is currently restricted. You may be able to access a copy if URLs are provided) (KAR id:75898)

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Language: English

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Abstract

This thesis is comprised of three essays on the topics of financial econometrics and forecasting. In the first essay we examine whether speculative bubbles are present in the US and UK commercial, equity and residential real estate markets. The real estate indices are decomposed to fundamental and non-fundamental components using a wide set of economic indicators and penalized regressions. In order to determine whether the observed deviations of the actual price index from its fundamental value are due to the presence of bubbles, we use two complementary methodologies, the first based on right-side unit root tests for explosive behavior and the second on regime switching models for bubbles. The models using the alternative fundamental specifications are found to exhibit superior out-of-sample performance compared to the stylized alternative models.

In the final essay we propose a new approach to pairs trading, which takes advantage of the information in the conditional quantiles of the distribution of asset returns. In this framework the pairs are sorted and selected based on cointegration tests and during trading the trading signal is extracted using quantile regression. We apply the strategy to the S&P 100 constituents and evaluate the performance of the pairs trading strategy using a variety of economic and risk-adjusted metrics and under an asset pricing framework, in order to examine whether the profitability of the new strategy can be explained by various risk factors. Our findings suggest that the quantile regression pairs trading strategies based on the lower quantiles tend to outperform all other models.

Item Type: Thesis (Doctor of Philosophy (PhD))
Thesis advisor: Panopoulou, Ekaterini
Thesis advisor: Tunaru, Radu
Uncontrolled keywords: Econometrics Forecasting Finance
SWORD Depositor: System Moodle
Depositing User: System Moodle
Date Deposited: 20 Aug 2019 10:10 UTC
Last Modified: 15 Mar 2021 15:27 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/75898 (The current URI for this page, for reference purposes)
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