This paper proposes to estimate the covariance matrix of stock returns by an optimally weighted average of two existing estimators: the sample covariance matrix and single-index covariance matrix. This method is generally known as shrinkage, and it is standard in decision theory and in empirical...

Contrary to the common wisdom that asset prices are hardly possible to forecast, we show that high and low prices of equity shares are largely predictable. We propose to model them using a simple implementation of a fractional vector autoregressive model with error correction (FVECM). This model...

The management and monitoring of very large portfolios of financial assets are routine for many individuals and organizations. The two most widely used models of conditional covariances and correlations in the class of multivariate GARCH models are BEKK and DCC. It is well known that BEKK...

The financial economics literature proposes dozens of performance measures to be used, for instance, to compare, analyse, rank and select assets. There is thus a problem: which measures should be considered? We extend the current literature by comparing a large set of performance measures over...

Contrary to the common wisdom that asset prices are barely possible to forecast, we show that that high and low prices of equity shares are largely predictable. We propose to model them using a simple implementation of a fractional vector autoregressive model with error correction (FVECM). This...

The intercept of standard Single Index and Conditional Single Index models, the so-called alpha, is often used to evaluate the long-run performance of managed portfolios. However, this measure is not always appropriate for detecting the presence and impact of active management strategies. Based...

This paper examines the effectiveness of using futures contracts as hedging instruments of: (1) alternative models of volatility for estimating conditional variances and covariances; (2) alternative currencies; and (3) alternative maturities of futures contracts. For this purpose, daily data of...

The mispricing of marketing performance indicators (such as brand equity, churn, and customer satisfaction) is an important element of arguments in favor of the financial value of marketing investments. Evidence for mispricing can be assessed by examining whether or not portfolios composed of...

This paper investigates dynamic currency hedging benefits, with a further focus on the impact of currency hedging before and during the recent financial crises originated from the subprime and the Euro sovereign bonds. We take the point of view of a Euro-based institutional investor who...

Markowitz (1952) portfolio selection requires estimates of (i) the vector of expected returns and (ii) the covariance matrix of returns. Many successful proposals to address the first estimation problem exist by now. This paper addresses the second estimation problem. We promote a nonlinear...