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The virtue of complexity in machine learning portfolios
Kelly, Bryan T.; Malamud, Semyon; Zhou, Kangying - 2021
Contrary to conventional wisdom in nance, return prediction R2 and optimal portfolio Sharpe ratio generally increase with model parameterization, even when minimal regularization is used. We theoretically characterize the behavior of return prediction models in the high complexity regime, i.e....
Persistent link: https://www.econbiz.de/10012800453
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Principal portfolios
Kelly, Bryan T.; Malamud, Semyon; Pedersen, Lasse Heje - 2020 - This version: June 8, 2020
We propose a new asset-pricing framework in which all securities' signals are used to predict each individual return. While the literature focuses on each security's own- signal predictability, assuming an equal strength across securities, our framework is flexible and includes...
Persistent link: https://www.econbiz.de/10012271188
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Risk-Free Rates and Convenience Yields Around the World
Diamond, William; Van Tassel, Peter - 2022
This paper constructs risk-free interest rates implicit in index option prices for ten of the major G11 currencies. We compare these rates to the yields of government bonds to provide international estimates of the convenience yield earned by safe assets. Average convenience yields across...
Persistent link: https://www.econbiz.de/10014030002
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Asset allocation and risk taking under different interest rate regimes
Hermans, Lieven; Kostka, Thomas; Vassallo, Danilo - 2023
We study the effects of low short-term interest rates on the optimal portfolio allocation in Markowitz portfolios and Risk parity portfolios. We propose a measure of Portfolio Instability, gauging the amount of optimal portfolio shifts needed to respond to exogenous shocks to the expected risk...
Persistent link: https://www.econbiz.de/10014278642
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A sensitivities based CoVaR approach to asset commonality and its application to SSM banks
Del Vecchio, Leonardo; Giglio, Carla; Shaw, Frances; … - 2022
asset commonality in the spirit of CoVaR as defined by Adrian and Brunnermeier (2016). Based on granular information, we …
Persistent link: https://www.econbiz.de/10013373564
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Hedge fund stock trading in the financial crisis of 2007 - 2009
Ben-David, Itzhak; Franzoni, Francesco; Moussawi, Rabih - 2011 - Rev. version May 2011
Hedge funds significantly reduced their equity holdings during the recent financial crisis. In 2008Q3-Q4, hedge funds sold about 29% of their aggregate portfolio. Redemptions and margin calls were the primary drivers of selloffs. Consistent with forced deleveraging, the selloffs took place in...
Persistent link: https://www.econbiz.de/10009009543
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Do hedge funds manipulate stock prices?
Ben-David, Itzhak; Franzoni, Francesco; Landier, Augustin; … - 2012 - March 2012
We find evidence that hedge funds significantly manipulate stock prices on critical reporting dates. We document that stocks held by hedge funds experience higher returns on the last day of the quarter, followed by a reversal the next day. For example, the stocks in the top quartile of hedge...
Persistent link: https://www.econbiz.de/10009554212
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Conditioning the information in portfolio optimization
Sala, Carlo; Barone-Adesi, Giovanni - 2015
This paper proposes a theoretical analysis on the impacts of using a suboptimal information set on the three main … utility of terminal wealth, we prove the existence of an information premium between what is required by the theory, a … complete information set thus a fully conditional measure, and what is instead achievable by en econometrician. Searching for …
Persistent link: https://www.econbiz.de/10011506342
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Average skewness matters!
Jondeau, Eric; Zhang, Qunzi - 2015
Average skewness, which is defined as the average of monthly skewness values across firms, performs well at predicting future market returns. This result still holds after controlling for the size or liquidity of the firms or for current business cycle conditions. We also find that average...
Persistent link: https://www.econbiz.de/10011412455
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Cross-sectional and time-series tests of return predictability : what is the difference?
Goyal, Amit; Jegadeesh, Narasimhan - 2015
We compare the performance of time-series (TS) and cross-sectional (CS) strategies based on past returns. While CS strategies are zero-net investment long/short strategies, TS strategies take on a time-varying net-long investment in risky assets. For individual stocks, the difference between the...
Persistent link: https://www.econbiz.de/10011296939