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Levendis, John - 2017

We present an active-learning computer exercise where students pick stocks for a portfolio. Using their selection of stocks, two different portfolios are created: 1) a portfolio that never rebalances and 2) a portfolio that continuously rebalances. They then calculate the rates of return and...

Persistent link: https://www.econbiz.de/10012946949

A Critique of Modern Portfolio Theory and Asset Pricing Models Based on Behavioral Insights from Benjamin Graham's Value Investing Paradigm

Otuteye, Eben - 2017

Modern Portfolio Theory, the Capital Asset Pricing Model, and the Efficient Market Hypothesis are the cornerstone … concepts in both academic and professional curricula. In spite of their long history and reputation, the CAPM and its …

Persistent link: https://www.econbiz.de/10012948474

Dealing with Non-Normality When Estimating Abnormal Returns and Systematic Risk of Private Equity : A Closed-Form Solution

Buchner, Axel - 2015

investments documented is lower than found in previous studies that estimate a standard CAPM, which is consistent with the theory … systematic risk and abnormal returns. In addition, unlike previous studies that derive estimates based on the standard CAPM, the … method employs a generalized CAPM that is based on the equilibrium model of Rubinstein (1976).This generalized CAPM …

Persistent link: https://www.econbiz.de/10013020161

A Minimum Discrepancy Formulation of Stochastic Dominance Analysis and Implications for Asset Pricing

Potì, Valerio - 2014

In this paper, we offer a MD (Minimum Discrepancy) reformulation of the estimation and inference problem that arises in SD analysis, delivering a method that retains the desirable properties of optimal GMM while offering better higher order ones and, most importantly, without requiring the...

Persistent link: https://www.econbiz.de/10013047100

Understanding Dynamic Mean Variance Asset Allocation

Lioui, Abraham - 2016

We provide a new portfolio decomposition formula that sheds light on the economics of portfolio choice for investors following the mean-variance (MV) criterion. We show that the number of components of a dynamic portfolio strategy can be reduced to two: the first is preference free and hedges...

Persistent link: https://www.econbiz.de/10012999249

A Taxonomy of Beta Based on Investment Outcomes

De Boer, Sanne - 2016

The traditional active vs passive debate has been shaken up by the emergence of “smart beta” strategies. As the population of these products has exploded, the quest to differentiate among them has focused on portfolio construction techniques rather than what actually matters, namely...

Persistent link: https://www.econbiz.de/10013000102

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

Predictability and the cross-section of expected returns : a challenge for asset pricing models

Schlag, Christian; Semenischev, Michael; Thimme, Julian - 2020 - This version: August 28, 2020

Many modern macro finance models imply that excess returns on arbitrary assets are predictable via the price-dividend ratio and the variance risk premium of the aggregate stock market. We propose a simple empirical test for the ability of such a model to explain the cross-section of expected...

Persistent link: https://www.econbiz.de/10012271368

Disentangling anomalies : risk versus mispricing

Birru, Justin; Mohrschladt, Hannes; Young, Trevor - 2020

Systematic mispricing primarily affects speculative stocks and predominantly results in overpricing, predicting lower average returns. Because speculative stocks overlap with stocks deemed risky by rational models, failing to control for exposure to systematic mispricing can bias tests of...

Persistent link: https://www.econbiz.de/10012388392

An experimental comparison of two exchange economies : long-lived asset versus short-lived asset

Carbone, Enrica; Hey, John Denis; Neugebauer, Tibor - 2020

The Lucas (1978) Tree Model lies at the heart of modern macro-finance. At its core, it provides an analysis of the equilibrium price of a long-lived asset in an exchange economy where consumption is the objective, and the sole purpose of the asset is to smooth consumption through time....

Persistent link: https://www.econbiz.de/10012322400