ConnectednessApproach (version 1.0.4)

MinimumConnectednessPortfolio: Minimum connectedness portfolio

Description

This function calculates the minimum connectedness portfolio

Usage

MinimumConnectednessPortfolio(
  x,
  H,
  method = c("cumsum", "cumprod"),
  statistics = c("Fisher", "Bartlett", "Fligner-Killeen", "Levene", "Brown-Forsythe"),
  long = TRUE,
  metric = "StdDev",
  digit = 2
)

Value

Get portfolio weights

Arguments

x

zoo return matrix (in percentage)

H

Pairwise connectedness matrix or alternatively variance-covariance or correlation matrix

method

Cumulative sum or cumulative product

statistics

Hedging effectiveness statistic

long

Allow only long portfolio position

metric

Risk measure of Sharpe Ratio (StdDev, VaR, or CVaR)

digit

Number of decimal places

Author

David Gabauer

References

Broadstock, D. C., Chatziantoniou, I., & Gabauer, D. (2022). Minimum connectedness portfolios and the market for green bonds: Advocating socially responsible investment (SRI) activity. In Applications in Energy Finance (pp. 217-253). Palgrave Macmillan, Cham.

Ederington, L. H. (1979). The hedging performance of the new futures markets. The Journal of Finance, 34(1), 157-170.

Antonakakis, N., Cunado, J., Filis, G., Gabauer, D., & de Gracia, F. P. (2020). Oil and asset classes implied volatilities: Investment strategies and hedging effectiveness. Energy Economics, 91, 104762.

Examples

data("g2020")
fit = VAR(g2020, configuration=list(nlag=1))
dca = TimeConnectedness(Phi=fit$B, Sigma=fit$Q, nfore=10, generalized=TRUE)
mcp = MinimumConnectednessPortfolio(g2020/100, dca$PCI, statistics="Fisher")
mcp$TABLE