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Meteor shower and global asset allocation

Ahmed, Rashad, Hasan, Mohammad S., Sultan, Jahangir (2020) Meteor shower and global asset allocation. European Journal of Finance, . ISSN 1351-847X. E-ISSN 1466-4364. (doi:10.1080/1351847X.2020.1774406) (KAR id:80921)

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https://doi.org/10.1080/1351847X.2020.1774406

Abstract

Cross-market linkages allow transmission of shocks among markets. Previous measures of such spillovers are based on broader stock market indexes, which cannot identify the industries that are the principal drivers of spillovers and the industries that are most exposed to the spillovers. Using investable equity indexes, we show that basic materials, financials, industrials, technologies, and telecommunication equity sectors were the primary exporters of volatility from the U.S. and that the magnitude of the spillovers increased primarily during andpost-2008 financial crisis. There is evidence that Canada was most vulnerable to spillovers, while China’s exposure was the lowest among the countries in the sample. Based on the minimum variance portfolio optimization, we find that investing in foreign industries with low exposure to spillovers from the U.S. generates high Sharpe ratios for U.S. portfolio managers, especially during the financial crisis.

Item Type: Article
DOI/Identification number: 10.1080/1351847X.2020.1774406
Uncontrolled keywords: Volatility, spillover, meteor shower, VIX, investable equity indexes, financial crisis, portfolio optimization.JEL Code: F36, F65, G01, G11, G15
Subjects: H Social Sciences > HG Finance
Divisions: Faculties > Social Sciences > Kent Business School
Depositing User: Mohammad Hasan
Date Deposited: 20 Apr 2020 08:44 UTC
Last Modified: 23 Jul 2020 11:34 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/80921 (The current URI for this page, for reference purposes)
Hasan, Mohammad S.: https://orcid.org/0000-0002-2453-6868
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