A Wavelet Multiscaling Approach to Multifactor Asset Pricing Models

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Risk and return are two fundamental concepts underlying business decisions involving $millions daily. Even for publicly listed companies risk is difficult to measure, particularly when the time dimension over which decisions are being made is ill-defined - potentially leading to sub-optimal decisions. This project focuses on the time scale question by developing an innovative methodology (based on wavelet multiscaling) that improves our understanding of risk and return. The project will help enhance risk control, and provide improved tools and knowledge to aid formation of superior globally diversified portfolios over different time scales - thereby delivering considerable long-term economic benefits.