Systematic risk in the biopharmaceutical sector: a multiscale approach

Gazi Salah Uddin, Muhammad Yahya* (Corresponding Author), Stelios Bekiros, Ranadeva Jayasekera, Gerhard Kling

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


It is well documented that the biopharmaceutical sector has exhibited weak financial returns, contributing to underinvestment. Innovations in the industry carry high risks; however, an analysis of systematic risk and return compared to other asset classes is missing. This paper investigates the time-frequency interconnectedness between stocks in the biotech sector and ten asset classes using daily cross-country data from 1995 to 2019. We capture investors' heterogeneous investment horizons by decomposing time series according to frequencies. Using a maximal overlap discrete wavelet transform (MODWT)
and a dynamic conditional correlation (DCC)-Student-t copula, diversification potentials are revealed, helping investors to reap the benefits of investing in biotech. Our findings indicate that the underlying assets exhibit nonlinear asymmetric behavior that strengthens during periods of turmoil.
Original languageEnglish
Number of pages24
JournalAnnals Of Operations Research
Early online date21 Nov 2021
Publication statusE-pub ahead of print - 21 Nov 2021


  • OR in medicine
  • biotech
  • time-varying copulas
  • wavelets
  • risk management


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