Transcript Public defence Joint Ph.D in Business Economics Katholieke

Public defence Joint Ph.D in Business Economics
Katholieke Universiteit Leuven and the Vrije Universiteit Brussel
Flexible Analysics for Characterizing and Exploiting the Time Variation in Financial
Risk
by Marjan Wauters
Promotors: prof. Piet Sercu, PhD (KU Leuven), prof. Frederick Schoubben, PhD
(KULeuven) and prof. Kris Boudt, PhD (VUB)
Summary
Investors trade-off risks and rewards when making financial decisions. A difficulty in this
process is that not all risks are rewarded equally at all times. Therefore, an investor may
benefit from understanding the drivers of the time variation of the risks to which he is
exposed such that he can optimize his risk taking behavior. In this thesis, I focus on the
time variation of financial risk from three perspectives. In Chapter One, I introduce a
dynamic allocation approach to exploit the time variation in the risk-return trade-off of
different equity portfolios. In Chapter Two, I study the impact of the equity portfolio
choice, and thus their risk and return characteristics, on the performance of portfolio
insurance strategies. In Chapter Three, I focus on the time variation in a firm’s sensitivity
to changes in the foreign exchange rate which I relate to macroeconomic announcements.
Overall, the thesis provides insights to investors, portfolio managers and corporate risk
managers which help them to adequately evaluate and exploit the impact of time
variation in financial risks.