Correlation Risk and Optimal Portfolio Choice

• 成果类型: Article
• 署名作者: Buraschi, Andrea; Porchia, Paolo; Trojani, Fabio
• 署名单位: Imperial College London; University of St Gallen; Universita della Svizzera Italiana; Swiss Finance Institute (SFI)
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2009.01533.x
• 发表日期: 2010
• 页码: 393-420
• 关键词: DYNAMIC ASSET ALLOCATION; stochastic volatility; consumption; constraints; returns; covariance; selection; moments

摘要

We develop a new framework for multivariate intertemporal portfolio choice that allows us to derive optimal portfolio implications for economies in which the degree of correlation across industries, countries, or asset classes is stochastic. Optimal portfolios include distinct hedging components against both stochastic volatility and correlation risk. We find that the hedging demand is typically larger than in univariate models, and it includes an economically significant covariance hedging component, which tends to increase with the persistence of variance-covariance shocks, the strength of leverage effects, the dimension of the investment opportunity set, and the presence of portfolio constraints.