[R-SIG-Finance] making sense of 100's of funds

Davy dcielen at vub.ac.be
Tue Aug 21 19:58:03 CEST 2007

John, Sylvain and colleagues,

I find both your remarks very interesting and to contain some truth, I
have included a working paper from Angela, ea (2003). Where they use a
time varying two factor model to test for contagion. They find that in
the Asian Crisis the correlations are indeed increased however no strong
evidence is found for contagion in the Mexican crisis. Now my question
is do you think that the use of time-varying models or stochastic models
(such as a Markov VAR) can reduce risk in a crisis by switching to safer
portfolios and by switching to high risk (and hopefully high yielding)
portfolios in better times?

I'm very interested to hear your opinions,

Davy Cielen
dcielen at vub.ac.be
Student Business Engineering, 
International Master in Management Science,
Solvay Business School

Angela, Bekeart and Campbell, 2003, Market Integration and contagion,
working paper, available from http://www.nber.org/papers/w9510

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