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Wavelet timescales and conditional relationship between higher- order systematic co-moments and portfolio returns: evidence in Australian data

Author

Listed:
  • Don U.A. Galagedera

    (Monash University)

  • Elizabeth A. Maharaj

    (Monash University)

Abstract

This paper investigates association between portfolio returns and higher-order systematic co-moments at different timescales obtained through wavelet multi-scaling- a technique that decomposes a given return series into different timescales enabling investigation at different return intervals. For some portfolios, the relative risk positions indicated by systematic co-moments at higher timescales is different from those revealed in raw returns. A strong positive (negative) linear association between beta and co-kurtosis and portfolio return in the up (down) market is observed in raw returns and at different timescales. The beta risk is priced in the up and down markets and the co-kurtosis is not. Co-skewness does not appear to be linearly associated with portfolio returns even after the up and down market split and is not priced.

Suggested Citation

  • Don U.A. Galagedera & Elizabeth A. Maharaj, 2004. "Wavelet timescales and conditional relationship between higher- order systematic co-moments and portfolio returns: evidence in Australian data," Finance 0409056, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0409056
    Note: Type of Document - pdf; pages: 30
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Wavelet multi-scaling; higher-order systematic co-moments; asset pricing;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    NEP fields

    This paper has been announced in the following NEP Reports:

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