Artur Machno

The impact of asynchronous trading on Epps effect on Warsaw Stock Exchange

The main goal of the analysis is the verification of whether asynchrony in transaction times is a considerable cause of the Epps effect on the Warsaw Stock Exchange among the most liquid assets. A method for compensating for the impact of asynchrony in trading on the Epps effect is presented. The method is easily applicable. Calculations are made using the exact time of transactions and prices of the assets. The estimation is not biased by intervals during which no transactions have taken place. Among all the analyzed stock pairs, asynchrony turns out to be the main cause of the Epps effect. However, the corrected correlation estimator seems to be more volatile than the regular estimator of the correlation. The presented analysis can be reproduced for the same data or replicated for another dataset; all R codes used in the process of writing this article are available upon request. The main novelty/value added of this paper is the application to an emerging market of a new method for compensating for asynchrony in trading.

Modeling dependence structure among European markets and among Asian-Pacific markets: a regime switching regular vine copula approach

This paper investigates the structure of dependence among twelve European markets and among twelve Asian-Pacific markets. The dynamic of the dependence structure is described by a two-state regime switching model. The dependence structure during a bull phase is modelled by the Gaussian copula, while dependence during a bear phase is modelled by the regular vine copula. We analyze the regular vine structure in the second regime precisely. We perform a simplification procedure using a likelihood-ratio test and discuss the substitution of general regular vines by canonical vines or drawable vines. The analysis confirms the two-state nature of financial markets in addition to asymmetric and heavy-tailed dependences. Additionally, the European market has proven to be more strongly connected than the Asian-Pacific market, and European dependences are deeper in terms of conditional dependences. The results can be used by international investors by taking into account differences of both analyzed regions. Additionally, the analysis may help with the crisis prediction. The shift time to the market phase describing crisis times occurs significantly before the crisis itself.

Empirical Verification of World’s Regions Profitability in Dynamic International Investment Strategy

The main goal of the work is to present the empirical verification of the investment attractiveness in a given world financial region. The attractiveness of a region is represented by the share of assets from this region in the optimal portfolio. The multivariate GARCH model has been used to describe international dependencies. Optimal portfolios based on Value at Risk and Expected Shortfall minimization have been compared to the Markowitz portfolio. Indications, which should be taken into account by investors willing to invest in different world regions, have been presented as the result