arXiv subjects

Jozef Baruník

Publications and source records attributed to Jozef Baruník.

4 recordsLinked to original sources

arXiv2021

Quantile Spectral Beta: A Tale of Tail Risks, Investment Horizons, and Asset Prices

This paper investigates how two important sources of risk -- market tail risk and extreme market volatility risk -- are priced into the cross-section of asset returns across various investment horizons. To identify such risks, we propose a quantile spectral beta representation of risk based on the decomposition of covariance between indicator functions that capture fluctuations over various frequencies. We study the asymptotic behavior of the proposed estimators of such risk. Empirically, we find that tail risk is a short-term phenomenon, whereas extreme volatility risk is priced by investors in the long term when pricing a cross-section of individual stocks. In addition, we study popular industry, size and value, profit, investment or book-to-market portfolios, as well as portfolios constructed from various asset classes, portfolios sorted on cash flow duration and other strategies. These results reveal that tail-dependent and horizon-specific risks are priced heterogeneously across datasets and are important sources of risk for investors.

q-fin.PR↗

arXiv2019

Total, asymmetric and frequency connectedness between oil and forex markets

We analyze total, asymmetric and frequency connectedness between oil and forex markets using high-frequency, intra-day data over the period 2007 -- 2017. By employing variance decompositions and their spectral representation in combination with realized semivariances to account for asymmetric and frequency connectedness, we obtain interesting results. We show that divergence in monetary policy regimes affects forex volatility spillovers but that adding oil to a forex portfolio decreases the total connectedness of the mixed portfolio. Asymmetries in connectedness are relatively small. While negative shocks dominate forex volatility connectedness, positive shocks prevail when oil and forex markets are assessed jointly. Frequency connectedness is largely driven by uncertainty shocks and to a lesser extent by liquidity shocks, which impact long-term connectedness the most and lead to its dramatic increase during periods of distress.

q-fin.GN↗

arXiv2018

Quantile Coherency: A General Measure for Dependence between Cyclical Economic Variables

In this paper, we introduce quantile coherency to measure general dependence structures emerging in the joint distribution in the frequency domain and argue that this type of dependence is natural for economic time series but remains invisible when only the traditional analysis is employed. We define estimators which capture the general dependence structure, provide a detailed analysis of their asymptotic properties and discuss how to conduct inference for a general class of possibly nonlinear processes. In an empirical illustration we examine the dependence of bivariate stock market returns and shed new light on measurement of tail risk in financial markets. We also provide a modelling exercise to illustrate how applied researchers can benefit from using quantile coherency when assessing time series models.

math.ST↗

arXiv2018

Panel quantile regressions for estimating and predicting the Value--at--Risk of commodities

This paper investigates how realized and option implied volatilities are related to the future quantiles of commodity returns. Whereas realized volatility measures ex-post uncertainty, volatility implied by option prices reveals the market's expectation and is often used as an ex-ante measure of the investor sentiment. Using a flexible panel quantile regression framework, we show how the future conditional quantiles of commodities returns depend on both ex-post and ex-ante uncertainty measures. Empirical analysis of the most liquid commodities covering main sectors including energy, food, agricultural, precious and industrial metals reveal several important stylized facts about the data. We document common patterns of the dependence between future quantile returns and ex-post as well as ex-ante volatilities. We further show that conditional returns distribution is platykurtic and time-invariant. The approach can serve as a useful risk management tools for investors interested in commodity future contracts.

q-fin.RM↗