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Portfolio Choice in the Presence of Estimation Error : A Pricing Model Filter Approach

Lozano, Martin - 2014

diversification effect by reducing the estimation error of the sample estimators. Traditional alternatives aimed to address the … cannot enhance the diversification potential since they tend to mimic (not to outperform) the suboptimal constant rule …

Persistent link: https://www.econbiz.de/10013049595

Portfolio Efficiency Tests with Conditioning Information - Comparing GMM and GEL Estimators

Vigo Pereira, Caio - 2020

We evaluate the use of Generalized Empirical Likelihood (GEL) estimators in portfolio efficiency tests for asset pricing models in the presence of conditional information. Estimators from GEL family present some optimal statistical properties, such as robustness to misspecification and better...

Persistent link: https://www.econbiz.de/10012848570

Estimation of Multivariate Asset Models with Jumps

Loregian, Angela - 2018

We propose a consistent and computationally efficient 2-step methodology for the estimation of multidimensional non-Gaussian asset models built using Lévy processes. The proposed framework allows for dependence between assets and different tail-behaviors and jump structures for each asset. Our...

Persistent link: https://www.econbiz.de/10012937321

Factor Investing : Risk Premia vs. Diversification Benefits

Briere, Marie - 2017

-off between the risk premia associated with factors and the diversification potential of sectors. When short selling is authorized ….e., in periods where diversification is needed the most …

Persistent link: https://www.econbiz.de/10012971644

Diversification Intensive of Risk Premia

Sogiakas, Vasilios I. - 2015

diversification effects. Using data from the main US exchanges, there is strong evidence of over- and under-estimation of factor risk … premia relevant to their intrinsic values. We propose an amended multifactor asset pricing model, the diversification risk … formed on size and liquidity suffer from diversification asymmetries. Specifically, the size effect dies out when the …

Persistent link: https://www.econbiz.de/10013034028

On transaction-cost models in continuous-time markets

Poufinas, Thomas - In: International Journal of Financial Studies : open … 3 (2015) 2, pp. 102-135

Transaction-cost models in continuous-time markets are considered. Given that investors decide to buy or sell at certain time instants, we study the existence of trading strategies that reach a certain final wealth level in continuous-time markets, under the assumption that transaction costs,...

Persistent link: https://www.econbiz.de/10011308467

Yes, the CAPM is testable

Guermat, Cherif - In: Journal of Banking & Finance 46 (2014) C, pp. 31-42

It is well-known that cross-sectional tests of the CAPM are problematic. The market indexes used in empirical tests are likely to be inefficient ex ante, which could lead to spurious results even in the absence of sampling errors. This problem has led many to express serious doubt on the...

Persistent link: https://www.econbiz.de/10010907096

Shrinking Beta

Blitz, David; Swinkels, Laurens; Ūsaitė, Kristina; … - 2022

Betas are used in many applications ranging from asset pricing tests, cost of capital estimation, investment management and risk management. Beta needs to be estimated, and to reduce estimation error, shrinkage to its cross-sectional average value of one is often applied. Since beta is the...

Persistent link: https://www.econbiz.de/10013299906

Efficient Sorting : A More Powerful Test for Cross-Sectional Anomalies

Ledoit, Olivier - 2018

Many researchers seek factors that predict the cross-section of stock returns. The standard methodology sorts stocks according to their factor scores into quantiles and forms a corresponding long-short portfolio. Such a course of action ignores any information on the covariance matrix of stock...

Persistent link: https://www.econbiz.de/10012935115

Portfolio Choice with Model Misspecification : A Foundation for Alpha and Beta Portfolios

Uppal, Raman - 2016

Our objective is to investigate the effect of model misspecification on mean-variance portfolios and to show how asset-pricing theory and asymptotic analysis (for large number of assets) can be used to provide powerful solutions to mitigate misspecification. The starting point of our analysis is...

Persistent link: https://www.econbiz.de/10013002828