Development of an econometric model for dynamic management of recession risk in equity portfolios : construction of an empirical measure of time-varying recession risk : estimation of cross-sectional differences in recession risk exposure among equities and associated differences in risk premia
Author(s)
Chousakos, Kyriakos
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Alternative title
Construction of an empirical measure of time-varying recession risk
Estimation of cross-sectional differences in recession risk exposure among equities and associated differences in risk premia
Other Contributors
Sloan School of Management. Master of Finance Program.
Advisor
Leonid Kogan.
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Recessions are an inherent part of economic cycles. During the last decade we have experienced two extended periods of significant economic slowdown accompanied by major downturns in most of the asset classes and especially in equities. Investors during recessions suffer from severe losses and diversification does not provide the optimal solution. Through the development of an econometric model for dynamic management of recession risk in equity portfolios based on an empirical measure of timevarying recession risk, I plan to estimate cross-sectional differences in recession risk exposure among equities and associated differences in risk premia. The analysis is expanded on an industry level, where among industries clear patterns are identified in terms recession risk exposure. In the last part of the report I explore the possibility of creating a trading strategy which is able to generate significant performance benefiting from the market underreaction to recession risk.
Description
Thesis (M. Fin.)--Massachusetts Institute of Technology, Sloan School of Management, Master of Finance Program, 2011. Cataloged from PDF version of thesis. Includes bibliographical references (p. 31).
Date issued
2011Department
Sloan School of Management. Master of Finance Program.; Sloan School of ManagementPublisher
Massachusetts Institute of Technology
Keywords
Sloan School of Management. Master of Finance Program.