Tag: GARCH models

Does the day of week effect exist in other asset classes?

Posted on | by Robin Jakob

Purpose: This study aims to investigate the day-of-the-week (DoW) effect in globally listed private equity (LPE) markets using daily data covering the period 2004–2021. Design/methodology /approach: To investigate the existence of the DoW effect in globally LPE markets, ordinary least squares regression, generalised autoregressive conditional heteroscedasticity (GARCH) regression and robust regressions are used. In addition, robustness audits are conducted by subdividing the sampling period into two sub-periods: pre-financial and post-financial crisis. Findings: Limited statistically significant evidence is found for the DoW effect. By taking time-varying volatility into account, a statistically significant DoW effect can be observed, indicating that the DoW effect is driven by time-varying volatility. Economic significance is captured through visual inspection of average daily returns, which illustrate that Monday returns are lower than the other weekdays. Practical implications: The results have important implications on whether to adopt a DoW strategy for investors in LPE. The findings show that higher returns on selected days of the week for certain indices are possible.

Authors: Marcel Steinborn
Publication date: 26 April 2023
Published in: Studies in Economics and Finance, Emerald Group Publishing Limited
Volume/ Ausgabe:Volume 41, Issue 1
Source download link: https://www.emerald.com/insight/content/doi/10.1108/SEF-12-2021-0517/full/html

Modeling the volatilities of globally listed PE markets

Posted on | by Robin Jakob

Purpose: This paper analyzes the characteristics of stochastic volatility processes in globally listed private equity markets, which are represented by nine global, regional, and style indices, and reveals transmissions in the conditional variances between the different markets, based on weekly data covering the period January 2011 to December 2020. Methodology: The study uses the GARCH(p,q) model, and its EGARCH and GARCH-in-mean extensions. Findings: The estimates of the volatility models GARCH, EGARCH, and GARCH-M for testing the stylized properties persistence, asymmetry, mean reversion, and risk premium lead to very different results, depending on the respective LPE index. Practical implications: The knowledge of conditional volatilities of listed private equity returns as well as the detection of volatility transmissions between the different listed private equity markets under investigation serve to support asset allocation decisions with respect to risk management or portfolio allocation. Hence, our findings are important for all kinds of investors and asset managers who consider investments in listed private equity. Originality/value: The authors present a novel study that examines the conditional variance for globally listed private equity markets by using LPX indices, offering valuable insight into this growing asset class.

Authors: Lars Tegtmeier
Publication date: 29 March 2022
Published in: Studies in Economics and Finance, Emerald Group Publishing Limited
Volume/ Ausgabe: Volume 40, Issue 1
Source download link: https://www.emerald.com/insight/content/doi/10.1108/SEF-04-2021-0129/full/html