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Goyenko, Ruslan; Kelly, Bryan T.; Moskowitz, Tobias J.; … - National Bureau of Economic Research - 2024

Portfolio optimization focuses on risk and return prediction, yet implementation costs critically matter. Predicting …

Persistent link: https://www.econbiz.de/10015094879

Rey, Hélène; Planat, Adrien Rousset; Stavrakeva, Vania; … - National Bureau of Economic Research - 2024

We introduce a novel empirical decomposition of equity price growth rates in terms of equity holdings, based on market-clearing conditions. Although our sample holdings cover only an average of 5% of market capitalization, our reconstructed equity holdings account for, on average, 89% of the...

Persistent link: https://www.econbiz.de/10014635719

Financial Machine Learning

Kelly, Bryan T.; Xiu, Dacheng - National Bureau of Economic Research - 2023

We survey the nascent literature on machine learning in the study of financial markets. We highlight the best examples of what this line of research has to offer and recommend promising directions for future research. This survey is designed for both financial economists interested in grasping...

Persistent link: https://www.econbiz.de/10014322889

Optimal Dynamic Asset Allocation with Transaction Costs : The Role of Hedging Demands

Collin-Dufresne, Pierre; Daniel, Kent; Sağlam, Mehmet - National Bureau of Economic Research - 2024

A number of papers have solved for the optimal dynamic portfolio strategy when expected returns are time-varying and trading is costly, but only for agents with myopic utility. Non-myopic agents benefit from hedging against future shocks to the investment opportunity set even when transaction...

Persistent link: https://www.econbiz.de/10015094900

Asset Pricing with Optimal Under-Diversification

Elenev, Vadim; Landvoigt, Tim - National Bureau of Economic Research - 2023

feature higher risk free rates, lower risk premiums on fully diversified and concentrated assets, less capital accumulation …, yet higher consumption and welfare. Exposure to undiversified firm risk can explain approximately 40% of the level and 20 …

Persistent link: https://www.econbiz.de/10014250139

RIM-Based Value Premium and Factor Pricing Using Value-Price Divergence

Cong, Lin William; George, Nathan Darden; Wang, Guojun - National Bureau of Economic Research - 2023

We document that value-to-price, the ratio of Residual-Income-Model-based valuation to market price, subsumes the power of book-to-market ratio and many other value or quality measures in predicting stock returns. Long-short value-to-price portfolios hedge against momentum, revitalize the...

Persistent link: https://www.econbiz.de/10014226164

Dynamic Trading Strategies and Portfolio Choice

Bansal, Ravi - 2004

Traditional mean-variance efficient portfolios do not capture the potential wealth creation opportunities provided by predictability of asset returns. We propose a simple method for constructing optimally managed portfolios that exploits the possibility that asset returns are predictable. We...

Persistent link: https://www.econbiz.de/10012467869

A Model of Momentum

Liu, Laura Xiaolei - 2011

Optimal investment of firms implies that expected stock returns are tied with the expected marginal benefit of investment divided by the marginal cost of investment. Winners have higher expected growth and expected marginal productivity (two major components of the marginal benefit of...

Persistent link: https://www.econbiz.de/10012461911

Economic Tracking Portfolios

Lamont, Owen - 1999

tracking portfolios are useful in forecasting macroeconomic variables and hedging economic risk …

Persistent link: https://www.econbiz.de/10012471746

How Relevant is Volatility Forecasting for Financial Risk Management?

Christoffersen, Peter F. - 1998

It depends. If volatility fluctuates in a forecastable way, then volatility forecasts are useful for risk management …; hence the interest in volatility forecastability in the risk management literature. Volatility forecastability, however … volatility forecastability decays quickly with horizon. Volatility forecastability, although clearly of relevance for risk …

Persistent link: https://www.econbiz.de/10012471968