I investigate the question of how to construct a benchmark replicating portfolio consisting of a subset of the benchmark’s components. I consider two approaches: a sequential stepwise regression and another method based on factor models of security returns´ first and second moments. The first...

In this paper assess the relative performance of US mutual funds using a non-parametric method such as data envelopment analysis (DEA). In particular, we assess the changes of mutual funds’ total productivity using the DEA-based Tornqvist productivity Index. The findings show significant...

This paper aims to evaluate the risk-adjusted performance of Malaysian mutual funds using the modified performance evaluation ratios by the drawdown risk measure (DRM) based on modern portfolio theory, and to represent the results in a manner which is easily understood by the average investors...

I investigate the question of how to construct a benchmark replicating portfolio consisting of a subset of the benchmark's components. I consider two approaches: a sequential stepwise regression and another method based on factor models of security returns' first and second moments. The first...

This chapter presents an empirical application of Bayesian MCMC estimation to the three main asset pricing models in use in the financial econometrics literature, namely, the Capital Asset Pricing Model (CAPM), the Fama-French (1992) three-factor model, and the Carhart (1997) four-factor model...

We find that in Australia, Mid/Small-cap funds often have significantly positive net alphas and this is driven by their strong performance in down-markets. In contrast Large-cap funds often have significantly negative net alphas and this is driven by their relatively poor performance in...

I investigate the question of how to construct a portfolio consisting of a few securities that an investor can use to track a benchmark. I consider two approaches: a sequential stepwise regression and another method based on factor models of security returns. The first approach produces the...

I propose an exact finite sample test of the risk reduction of the global minimum variance (GMV) portfolio. The GMV test statistic has a straightforward geometric and portfolio interpretation and complements the celebrated GRS test in Gibbons, Ross and Shanken (1989). In practical applications,...

We investigate whether adding fundamental indices to a portfolio provides increased diversification benefits. Our results show that equity investors who care only about portfolio mean and variance will benefit from including a fundamental index in their portfolios. This benefit is especially...

We propose a novel approach to the benchmark replication problem which uses a minimum tracking error variance as an objective subject to a target expected outperformance. When no budget constraint is imposed on the replicating portfolio, the solution involves that standard hedge portfolio and...