Spillovers and Asset Allocation

Lai T. Hoang, Dirk G. Baur
2021 Journal of Risk and Financial Management  
There is a large and growing literature on spillovers but no study that systematically evaluates the importance of spillovers for portfolio management. This paper provides such an analysis and demonstrates that spillovers are fully embedded in estimates of expected returns, variances, and correlations and that estimation of spillovers is not necessary for asset allocation. Simulations of typical empirical spillover settings further show that same-frequency spillovers are often negligible and spurious.
doi:10.3390/jrfm14080345 fatcat:6lnx35bqvjdpbg3dy4c22k3wva