Intraday return predictability, portfolio maximisation, and hedging

Paresh Kumar Narayan, Susan Sunila Sharma

Research output: Contribution to journalArticleResearchpeer-review

13 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)105-116
Number of pages12
JournalEmerging Markets Review
Volume28
DOIs
Publication statusPublished - Sep 2016
Externally publishedYes

Keywords

  • Chinese stock returns
  • Futures
  • Intraday data
  • Predictability

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