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Idiosyncratic Volatility and the Cross-Section of Anomaly Returns : Is Risk Your Ally?
Zaremba, Adam - 2018
Due to arbitrage risk asymmetries, the relationship between idiosyncratic risk and expected returns is positive (negative) among overpriced (underpriced) stocks. We offer a new active anomaly-selection strategy that capitalizes on this effect. To this end, we consider eleven equity anomalies in...
Persistent link: https://www.econbiz.de/10012913480
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Black-Litterman in Continuous Time : The Case for Filtering
Davis, Mark - 2013
In this article, we extend the Black-Litterman approach to a continuous time setting. We model analyst views jointly with asset prices to estimate the unobservable factors driving asset returns. The key in our approach is that the filtering problem and the stochastic control problem are...
Persistent link: https://www.econbiz.de/10013082305
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A Conditional CAPM Model with Local Covariates for Detecting and Evaluating Active Management
Caporin, Massimiliano - 2009
The intercept of the standard CAPM and Conditional CAPM model, the alpha, is used to evaluate the long-run performance of managed portfolios. However, this measure is not always appropriate for detecting the presence and impact of active management strategies. In this paper, we introduce a...
Persistent link: https://www.econbiz.de/10013156556
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Characteristic-Based Mean-Variance Portfolio Choice
Hjalmarsson, Erik - 2009
We study empirical mean-variance optimization when the portfolio weights are restricted to be direct functions of underlying stock characteristics such as value and momentum. The closed-form solution to the portfolio weights estimator shows that the portfolio problem in this case reduces to a...
Persistent link: https://www.econbiz.de/10013155054
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Uncertainty in the Black-Litterman model : a practical note
Fuhrer, Adrian; Hock, Thorsten - 2019 - Version: July 15, 2019
allerdings nur mit Unsicherheit geschätzt werden können, dann tendiert die Mean-Varianz-Optimierung zu einer Maximierung der … Vermögensallokation weit verbreitet. Es erlaubt die Integration von Rendite-Prognosen und deren Unsicherheit. Beide Größen können mit den …-Optimierung. Im Black-Litterman-Modell wird die Unsicherheit bezüglich der leichgewichtsrenditen ausschließlich mit dem Parameter …
Persistent link: https://www.econbiz.de/10012042184
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Asset pricing and consumption-portfolio choice with recursive utility and unspanned risk
Kraft, Holger; Seiferling, Thomas; Seifried, Frank Thomas - 2014 - First version: March 6, 2014; this version: June 1, 2014
We study consumption-portfolio and asset pricing frameworks with recursive preferences and unspanned risk. We show that in both cases, portfolio choice and asset pricing, the value function of the investor/representative agent can be characterized by a specific semilinear partial differential...
Persistent link: https://www.econbiz.de/10010359861
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Model Uncertainty, Ambiguity Premium and Optimal Asset Allocation
Xu, Yuhong - 2016
In this paper I investigate financial markets with drift and volatility uncertainties. Appropriate definitions of arbitrage for super and sub-hedging strategies are presented such that the super and sub-hedging prices are reasonable. Especially the condition of arbitrage for sub-hedging strategy...
Persistent link: https://www.econbiz.de/10012987227
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A Closed-Form Solution of the Black-Litterman Model with Conditional Value at Risk
Pang, Tao - 2019
We consider a portfolio optimization problem of the Black-Litterman type, in which we use the conditional value-at-risk (CVaR) as the risk measure and we use the multi-variate elliptical distributions, instead of the multi-variate normal distribution, to model the financial asset returns. We...
Persistent link: https://www.econbiz.de/10012902710
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Downside Risk in Multiperiod Tracking Error Models
Barro, Diana - 2012
The recent crisis made it evident that replicating the performance of a benchmark is not a sufficient goal to meet the expectations of usually risk-averse investors. The manager should also consider that the investor are seeking for a downside protection when the benchmark performs poorly and...
Persistent link: https://www.econbiz.de/10013103103
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Digital Portfolio Theory : Portfolio Size, Versus Alpha, Beta, and Horizon Risk
Jones, C. Kenneth - 2013
Digital Portfolio Theory (DPT) permits investors to control their risk exposure with respect to multiple time horizons. DPT is a theoretical enhancement for estimating efficient portfolios that relaxes the normal distribution and zero autocorrelation assumptions of Modern Portfolio Theory (MPT)...
Persistent link: https://www.econbiz.de/10013095007