Essays on Risks in Investment Strategies
Abstract: This dissertation contains three articles, which investigate different types of risks investors encounter during the investment process.Article I investigates the relation between macroeconomic risk and higher-moment moment risk premia. This article uses the existing methodology on higher-moment swaps to estimate variance and skewness swaps and develops new methodology for kurtosis swaps. The expected excess returns on such swaps are interpreted as higher-moment risk premia. The findings suggest that macroeconomic risk is relevant for higher-moment risk premia and that higher-moment swaps are good candidates for hedging macroeconomic risk.Article II investigates the hedging and safe haven properties of gold and US Treasury bonds for different investment styles. The results show that hedging and safe haven properties depend on investment styles and change over time. US Treasury bonds exhibit more stable hedge properties than gold over time and should therefore be preferred by investors who hold market portfolios. The main lesson of the article is that investment style should be taken into consideration while formulating appropriate risk management and diversification strategies.Article III investigates how attention to different types of information are related to retail investors' portfolio performance. The findings suggest that paying attention has a differential impact on performance depending on the type of information. Portfolio monitoring and attention to financial education are positively related to performance, while attention to analytical information is detrimental to performance. The attention to technical analysis is negatively related to performance of actively trading investors, but improves the performance of less frequent traders.
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