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Intraday return predictability, portfolio maximisation, and hedging

journal contribution
posted on 01.09.2016, 00:00 authored by Paresh Narayan, Susan SharmaSusan Sharma
We examine whether intraday Chinese return predictability is linked to optimal portfolio holding and hedging. We find that: (1) S&P500 futures returns only predict Chinese spot market returns in up to 5-minute of trading with predictability disappearing at higher frequencies of trade; (2) the portfolio weight is maximised at the 5-minute trading frequency, when predictability is the strongest; and (3) when predictability is the strongest, significantly less shorting of the futures is required to minimise risk when a long position is taken in the Chinese market.

History

Journal

Emerging markets review

Volume

28

Pagination

105 - 116

Publisher

Elsevier

Location

Amsterdam, The Netherlands

ISSN

1566-0141

eISSN

1873-6173

Language

eng

Publication classification

C Journal article; C1 Refereed article in a scholarly journal

Copyright notice

2016, Elsevier