Skip Navigation

This Article
Right arrow Full Text
Right arrow Full Text (PDF)
Right arrow Alert me when this article is cited
Right arrow Alert me if a correction is posted
Services
Right arrow Email this article to a friend
Right arrow Similar articles in this journal
Right arrow Alert me to new issues of the journal
Right arrow Add to My Personal Archive
Right arrow Download to citation manager
Right arrowRequest Permissions
Google Scholar
Right arrow Articles by Manganelli, S.
Right arrow Search for Related Content
Social Bookmarking
Add to CiteULike   Add to Connotea   Add to Del.icio.us  
What's this?

Journal of Financial Econometrics Vol. 2, No. 3, pp. 370-389
Journal of Financial Econometrics, Vol. 2, No. 3, © Oxford University Press 2004; all rights reserved.

Asset Allocation by Variance Sensitivity Analysis

Simone Manganelli
     European Central Bank

Address correspondence to Simone Manganelli, DG-Research, European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany, or e-mail: simone.manganelli{at}ecb.int.

This article provides a solution to the curse of dimensionality associated to multivariate generalized autoregressive conditionally heteroskedastic (GARCH) estimation. We work with univariate portfolio GARCH models and show how the multivariate dimension of the portfolio allocation problem may be recovered from the univariate approach. The main tool we use is "variance sensitivity analysis," the change in the portfolio variance induced by an infinitesimal change in the portfolio allocation. We suggest a computationally feasible method to find minimum variance portfolios and estimate full variance-covariance matrices. An application to real data portfolios implements our methodology and compares its performance against that of selected popular alternatives.

KEYWORDS: dynamic correlations, multivariate GARCH, risk management

Received December 18, 2002; revised March 9, 2004; accepted March 31, 2004


Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us    What's this?


This article has been cited by other articles:


Home page
 JOURNAL OF FINANCIAL ECONOMETRICSHome page
M. Guidolin and A. Timmermann
Size and Value Anomalies under Regime Shifts
J. Financial Econometrics, January 1, 2008; 6(1): 1 - 48.
[Abstract] [Full Text] [PDF]


Disclaimer:
Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.