We analyze the joint out-of-sample predictive ability of a comprehensive set of 299 firm characteristics for cross-sectional stock returns. We develop a cross-sectional out-of-sample R2 statistic that provides an informative measure of the accuracy of cross-sectional return forecasts in terms of...

We study effects of correlation ambiguity on portfolio choice when the number of risky assets is large. We find that the optimal portfolio contains only a fraction of available risky assets. With 100 stocks randomly selected from the S&P 500, less than 20 stocks will be held in the optimal...

Aim/purpose - The aim of the paper is to rank the optimal portfolios of shares of companies listed on the Warsaw Stock Exchange, taking into account the investor’s propensity to risk. Design/methodology/approach - Investment portfolios consisting of varied number of companies selected from WIG...

Cross-sectional predictability of returns by past prices, or momentum, is a lasting market anomaly. Previous research reports numerous ways to measure momentum and establishes a multitude of factors predicting its performance. The emerging machine learning asset pricing literature further...

Several academics have studied the ability of hybrid models mixing univariate Generalized Autoregressive Conditional Heteroskedasticity (GARCH) models and neural networks to deliver better volatility predictions than purely econometric models. Despite presenting very promising results, the...

We examine in this paper the training and test set performance of several equity factor models with a dataset of 20 years of data, 1,200 stocks and 100 factors. First, we examine several models to forecast expected returns, which can be used as baselines for more complex models: linear...

This study has 4 contributions to the literature. First, the authors analyze the risk characteristics for 11 Relative Value hedge fund strategies. Second, the authors introduce 3 families of behavioral factors, the D family, the L family, and the R family. In contrast to previous hedge fund...

We introduce a flexible utility-based empirical approach to directly determine asset allocation decisions between risky and risk-free assets. This is in contrast to the commonly used two-step approach where least squares optimal statistical equity premium predictions are first constructed to...