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PORTFOLIO SELECTION BETWEEN A MATURE MARKET AND SELECTED EMERGING MARKETS INDICES IN THE PRESENCE OF STRUCTURAL BREAKS
Author(s) -
Njegić Jovan,
Živkov Dejan,
Momčilović Mirela
Publication year - 2019
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/boer.12187
Subject(s) - portfolio , hedge , bivariate analysis , index (typography) , economics , econometrics , selection (genetic algorithm) , emerging markets , financial economics , statistics , computer science , mathematics , finance , ecology , artificial intelligence , world wide web , biology
ABSTRACT The paper examines the influence of the structural breaks on the optimal weights, hedge ratios and hedge effectiveness index (HEI) of risk‐minimizing portfolios composed of S&P500 and selected emerging markets’ indices from East Europe, Asia and South America. We employ a bivariate DCC‐EGARCH models without and with structural breaks and we find better estimation features when structural breaks are included in the model. However, we do not find evidence that insertion of structural breaks increases portfolio hedging performances. The differences that exist between optimal weights, hedge ratios and HEI values are so small that tangible economic benefit for international investors do not exist.