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A Comparison of Cointegration and Copula Asset Allocation Approaches

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  • Y S Stander
  • D J Marais
  • I Botha

Abstract

The empirical performance of cointegration and copula asset allocation techniques are compared against that of the market. Multivariate copula structures are used to derive index-tracking portfolios which are then compared with that of portfolios constructed using cointegration techniques. The results suggest that modelling the long-term relationships between stocks by means of the cointegration approach do not consistently lead to portfolios that outperform the benchmark. Using a short-term asset allocation approach, such as the copula-simulation approach, lead to portfolios that perform at least as well as the cointegration portfolios.

Suggested Citation

  • Y S Stander & D J Marais & I Botha, 2013. "A Comparison of Cointegration and Copula Asset Allocation Approaches," Studies in Economics and Econometrics, Taylor & Francis Journals, vol. 37(1), pages 1-28, April.
    • Handle: RePEc:taf:rseexx:v:37:y:2013:i:1:p:1-28
    DOI: 10.1080/10800379.2013.12097245
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    Cited by:

    1. Yun Shi & Lin Yang & Mei Huang & Jun Steed Huang, 2021. "Multi-Factorized Semi-Covariance of Stock Markets and Gold Price," JRFM, MDPI, vol. 14(4), pages 1-11, April.

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