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Assessing the Time-Frequency Co-Movements among the Five Largest Engineering Consulting Companies: A Wavelet-Base Metrics of Contagion and VaR Ratio

Author

Listed:
  • Marcos Albuquerque Junior

    (Iscte-Instituto Universitário de Lisboa, 1649-026 Lisboa, Portugal)

  • José António Filipe

    (Departamento de Matemática, Iscte-Instituto Universitário de Lisboa, ISTAR-Iscte, BRU-Iscte, 1649-026 Lisboa, Portugal)

  • Paulo de Melo Jorge Neto

    (Center for Advanced Studies, Economics CAEN-UFC-Department of Economics, Federal University of Ceará, Fortaleza 60020-180, Brazil)

  • Cristiano da Costa da Silva

    (Graduate Program in Economics-EPP/UERN, Department of Economics, University of the State of Rio Grande do Norte, Mossoró 59610-210, Brazil)

Abstract

Diversification in a portfolio is an important tool for the systematic risk management that is inherent to different asset classes. The composition of a portfolio with domestic and international assets is seen as one of the main alternatives for building a diversified portfolio, as this approach tends to reduce portfolio return exposure depending on country factors. However, in scenarios where industry factors are predominant, international diversification can increase systematic risk in a portfolio centered on a single asset class. This study is a pioneer in using wavelet-based methods to identify intersectoral co-movements, based on a portfolio of shares of the world’s top five consulting engineering companies, providing an innovative way to be applied to this phenomenon. Our evidence indicates that companies share a strong pattern of co-movements among themselves, especially in cycles of 32 to 64 days, suggesting a higher exposure to risk for portfolios with an investment horizon in long-term cycles.

Suggested Citation

  • Marcos Albuquerque Junior & José António Filipe & Paulo de Melo Jorge Neto & Cristiano da Costa da Silva, 2021. "Assessing the Time-Frequency Co-Movements among the Five Largest Engineering Consulting Companies: A Wavelet-Base Metrics of Contagion and VaR Ratio," Mathematics, MDPI, vol. 9(5), pages 1-16, March.
    • Handle: RePEc:gam:jmathe:v:9:y:2021:i:5:p:504-:d:508184
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    References listed on IDEAS

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