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This paper analyzes the safety-first portfolio model under two different target assumptions, the fixed target, which is commonly assumed in the literature, and the random target, which has played only a minor role so far. As both targets can be easily motivated, the open question is, which...
Persistent link: https://www.econbiz.de/10009748960
I examine the sample selection bias in portfolio horse race. Numerous studies propose mean-variance portfolio rules to outperform the naive 1/N portfolio rule. However, the outperformance is often justified by a small number of pre-selected datasets. Using a new performance test based on a large...
Persistent link: https://www.econbiz.de/10012984969
of determining the optimal sampling frequency, which strikes a balance between variance and bias in covariance matrix … estimates due to market microstructure effects such as non-synchronous trading and bid-ask bounce. The optimal sampling …
Persistent link: https://www.econbiz.de/10011346450
This paper shows the importance of correcting for sample selection when investing in illiquid assets that trade endogenously. Using a sample of 32,928 paintings that sold repeatedly between 1960 and 2013, we find an asymmetric V-shaped relation between sale probabilities and returns. Adjusting...
Persistent link: https://www.econbiz.de/10012974260
benchmarks, and demonstrate how heterogeneous benchmarking generates a mechanism through which fundamental shocks propagate … across assets. Fluctuations in asset managers' capital invested for benchmarking purposes, scaled by the size of the economy … these benchmarking-induced spillovers by analyzing shock elasticities and cross-elasticities of price-dividend ratios, and …
Persistent link: https://www.econbiz.de/10012910534
The adequate evaluation of mutual fund performance and of the fund managers’ ability to add value is an issue to which it has been given special attention in the recent financial literature. One of the traditional evaluation measures most commonly used is Carhart's alpha. However, one of the...
Persistent link: https://www.econbiz.de/10014361402
’s approach with the use of sampling methods is developed in order to improve the allocation efficiency for a portfolio of … theory. Research implications/limitations - The research emphasized that in order to get a more diversified investment … occasions be statistically biased. Thus it was proved that sampling methods allow to obtain a less concentrated and volatile …
Persistent link: https://www.econbiz.de/10013166371
Performance measures such as alpha and the Sharpe ratio are typically based on sample returns net of fees. This implies the same weighing to sample returns and to fees. However, sample return parameters are noisy estimates of true parameters, while fees are known with certainty. Thus, intuition...
Persistent link: https://www.econbiz.de/10012950555
Prior literature finds that variables that can forecast market returns in sample do not beat historical averages in forecasting market returns out of sample. We propose a naïve model averaging (NMA) method, which produces mostly positive out-of-sample R2s for the variables that are significant...
Persistent link: https://www.econbiz.de/10012847697
We propose a comprehensive empirical strategy for optimizing the out-of-sample performance of sample mean-variance efficient portfolios. After constructing a sample objective function that accounts for the impact of estimation risk, specification errors, and transaction costs on portfolio...
Persistent link: https://www.econbiz.de/10013114851