Associate Professor Rogier Quaedvlieg's paper to be published in Econometrica

(L) Rogier Quaedvlieg and (R) Enrico Pennings, Vice Dean Research

Congratulations to Rogier Quaedvlieg, Associate Professor in Finance at Erasmus School of Economics, Prof. Tim Bollerslev and Prof. Andrew J. Patton, and Prof. Jia Li (all three from Duke University), on the acceptance of their paper Realized Semicovariances, by the world renowned journal Econometrica.

In their paper, the researchers propose a new decomposition of the realised covariance matrix into components based on the signs of the underlying high-frequency returns. Under an asymptotic setting in which the sampling interval goes to zero, they derive the asymptotic properties of the resulting realised semicovariance measures.

The first-order asymptotic results highlight how the concordant components and the mixed-sign component load differently on economic information concerning stochastic correlation and jumps. The second-order asymptotics, taking the form of a novel non-central limit theorem, further reveals the fine structure underlying the concordant semicovariances, as manifested in the form of co-drifting and dynamic "leverage" type effects.

In line with this anatomy, Quaedvlieg, Bollerslev, Li and Patton empirically document distinct dynamic dependencies in the different realised semicovariance components based on data for a large cross-section of individual stocks. The researchers further show that the accuracy of portfolio return variance forecasts may be significantly improved by using the realised semicovariance matrices to  'look inside' the realised covariance matrices for signs of direction.

About Econometrica

Established in 1933, Econometrica is a top-rated peer-reviewed academic journal of economics, published by Wiley-Blackwell on behalf of the Econometric Society. Econometrica publishes original articles in all branches of economics - theoretical and empirical, abstract and applied, providing wide-ranging coverage across the subject area.