Liquidity Premium, Liquidity-Adjusted Return and Volatility, and Extreme Liquidity
Portfolio Management
2024-02-20 v4 Computational Finance
General Finance
Risk Management
Statistical Finance
Abstract
We establish innovative liquidity premium measures, and construct liquidity-adjusted return and volatility to model assets with extreme liquidity, represented by a portfolio of selected crypto assets, and upon which we develop a set of liquidity-adjusted ARMA-GARCH/EGARCH models. We demonstrate that these models produce superior predictability at extreme liquidity to their traditional counterparts. We provide empirical support by comparing the performances of a series of Mean Variance portfolios.
Keywords
Cite
@article{arxiv.2306.15807,
title = {Liquidity Premium, Liquidity-Adjusted Return and Volatility, and Extreme Liquidity},
author = {Qi Deng and Zhong-guo Zhou},
journal= {arXiv preprint arXiv:2306.15807},
year = {2024}
}
Comments
48 page, 7 figures