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Title: The cost of downside protection and the time diversification issue in South Asian stock markets
Authors: Alles, L. A
Keywords: downside protection
diversification issue
South Asian stock markets
Time Diversification
Issue Date: 1-Jun-2008
Publisher: Routledge
Citation: Lakshman Alles (2008) The cost of downside protection and the time diversification issue in South Asian stock markets, Applied Financial Economics, 18:10, 835-843, DOI: 10.1080/09603100701222333
Series/Report no.: Applied Financial Economics;Vol 18 Issue 10 Pages 835-843
Abstract: The objectives of this article are to carry out a comparative study of the costs of downside protection for investors in the stock markets of Bangladesh, India, Pakistan and Sri Lanka, and to investigate the time diversification issue in these markets by examining the variation of this cost as the investment horizon is extended. The cost of downside protection and time diversification effects are investigated by examining the properties of a protective put strategy and a capital protected equity participation strategy in each country’s stock market over investment horizons ranging from 1 to20 years. Long-horizon investment outcomes are generated using a bootstrapping technique. Results indicate that the cost of downside protection differs from one country to another, but there is a common pattern of the cost decreasing as the investment horizon lengthens. In overall terms, the pattern of decreasing protection costs at longer investment horizons is consistent with the notion of the time diversification benefits of investment risk.
URI: http://localhost:80/handle/123456789/694
ISSN: 1466-4305
Appears in Collections:Research Papers - SLIIT Staff Publications

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