Showing 1 - 10 of 13
Following recent evidence of out-of-sample stock market return predictability, the authors aim to evaluate whether the potential benefits suggested by asset allocation theory can actually be captured in the real world using expected return estimates from a predictive system. The question is...
Persistent link: https://www.econbiz.de/10013033462
We present a two-factor volatility model to study the impact of news arrival and trading volume on stock returns variance. The model can explicitly account for the association between volatility and volume, as well as the persistence in equity variance. Unlike the standard "Mixture of...
Persistent link: https://www.econbiz.de/10012997324
We study product differentiation in the mutual fund industry. We design a model in which funds with heterogeneous perceived quality can choose their level of product differentiation. In equilibrium, high quality funds choose broad market designs (i.e., low differentiation) appealing to many...
Persistent link: https://www.econbiz.de/10013041294
If capital won't come to fund managers, fund managers will go to capital. I document that fund managers move across mutual fund firms to manage amounts of capital that better match their skill, which improves the allocative efficiency of capital across fund managers. For causal identification, I...
Persistent link: https://www.econbiz.de/10012846825
We analyze optimal investment strategies under the drawdown constraint that the wealth process never falls below a fixed fraction of its running maximum. We derive optimal allocation programs by solving numerically the Hamilton-Jacobi-Bellman equation that characterizes the finite horizon...
Persistent link: https://www.econbiz.de/10012957585
The long-term performance of any portfolio can be decomposed as the sum of the weighted average long-term return of its assets plus the volatility return of the portfolio. Hence, maximizing the volatility return of portfolios of assets with similar characteristics, such as factor portfolios,...
Persistent link: https://www.econbiz.de/10012997807
The predictive power of the dividend-price ratio has been the subject of intense scrutiny. Most studies on return predictability assume that predictor variables follow stationary processes with constant long-run means. Following recent evidence of the role of structural breaks in the...
Persistent link: https://www.econbiz.de/10012971454
Portfolio insurance strategies that control benchmark-underperformance risk require estimating the maximum multiplier of the risk budget, which determines the allocation to the performance-seeking asset (PSA) at each point in time. We explore the implications of taking into account the expected...
Persistent link: https://www.econbiz.de/10012911729
Whether idiosyncratic volatility has increased over time and whether it is a good predictor of future returns is a matter of active debate. We show formally through central limit arguments that there is a direct relationship between the dynamics of the cross-sectional variance of realized...
Persistent link: https://www.econbiz.de/10013146647
We solve for the growth-rate optimal multiplier of a portfolio insurance strategy in the general case with a locally risky reserve asset and stochastic state variables. The level of the optimal time-varying multiplier turns out to be lower than the standard constant multiplier of CPPI for common...
Persistent link: https://www.econbiz.de/10013058150