Characteristic Based Mean Variance Portfolio Choice
Download and Read Characteristic Based Mean Variance Portfolio Choice full books in PDF, ePUB, and Kindle. Read online free Characteristic Based Mean Variance Portfolio Choice ebook anywhere anytime directly on your device. We cannot guarantee that every ebooks is available!
Characteristic-based Mean-variance Portfolio Choice
Author | : Erik Hjalmarsson |
Publisher | : |
Total Pages | : 34 |
Release | : 2009 |
Genre | : Investment analysis |
ISBN | : |
Download Characteristic-based Mean-variance Portfolio Choice Book in PDF, Epub and Kindle
We study empirical mean-variance optimization when the portfolio weights are restricted to be direct functions of underlying stock characteristics such as value and momentum. The closed-form solution to the portfolio weights estimator shows that the portfolio problem in this case reduces to a mean-variance analysis of assets with returns given by single-characteristic strategies (e.g., momentum or value). In an empirical application to international stock return indexes, we show that the direct approach to estimating portfolio weights clearly beats a naive regression-based approach that models the conditional mean. However, a portfolio based on equal weights of the single-characteristic strategies performs about as well, and sometimes better, than the direct estimation approach, highlighting again the difficulties in beating the equal-weighted case in mean-variance analysis. The empirical results also highlight the potential for "stock-picking" in international indexes, using characteristics such as value and momentum, with the characteristic-based portfolios obtaining Sharpe ratios approximately three times larger than the world market.
Characteristic-based Mean-variance Portfolio Choice Related Books
Pages: 34
Pages: 404
Pages: 512
Pages: 654
Pages: 46