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Asset Allocation Under Distribution Uncertainty

Kacperczyk, Marcin T. - 2011

This paper shows how uncertainty about the type of return distribution (distribution uncertainty) can be incorporated in asset allocation decisions by using a novel, Bayesian semiparametric approach. To evaluate the economic importance of distribution uncertainty, the extent of changes in...

Persistent link: https://www.econbiz.de/10013126830

Risk, VaR, CVaR and Their Associated Portfolio Optimizations When Asset Returns Have a Multivariate Student T Distribution

Shaw, William Thornton - 2011

We show how to reduce the problem of computing VaR and CVaR with Student T return distributions to evaluation of analytical functions of the moments. This allows an analysis of the risk properties of systems to be carefully attributed between choices of risk function (e.g. VaR vs CVaR); choice...

Persistent link: https://www.econbiz.de/10013129064

Arithmetic and Continuous Return Mean-Variance Efficient Frontiers

Ferguson, Robert - 2019

The arithmetic mean-variance efficient frontier shows that taking more risk is always rewarded with higher expected arithmetic return. However, expected arithmetic return is a poor indicator of long-term arithmetic return, which corresponds to expected continuous return. For the continuous...

Persistent link: https://www.econbiz.de/10012901309

Reward-Risk Momentum Strategies Using Classical Tempered Stable Distribution

Choi, Jaehyung - 2015

We implement momentum strategies using reward-risk measures as ranking criteria based on classical tempered stable distribution. Performances and risk characteristics for the alternative portfolios are obtained in various asset classes and markets. The reward-risk momentum strategies with lower...

Persistent link: https://www.econbiz.de/10013033920

Algorithmic Portfolio Tilting to Harvest Higher Moment Gains

Boudt, Kris - 2020

Many financial portfolios are optimized without taking the higher moments into account. We recommend tilting these portfolios in a direction that increases their estimated mean and third central moment and decreases their variance and fourth central moment. The advantages of tilting come at the...

Persistent link: https://www.econbiz.de/10012849428

Reconciling Mean-Variance Portfolio Theory with Non-gaussian Returns

Lassance, Nathan - 2020

Mean-variance portfolio theory remains frequently used as investment rationale because of its simplicity, its closed … with many different objective functions, are numerically more complex, and exacerbate estimation risk. In this paper, we … reconcile mean-variance portfolio theory with non-Gaussian returns by identifying, among all portfolios on the mean …

Persistent link: https://www.econbiz.de/10012826981

Beta dispersion and market timing

Kuntz, Laura-Chloé - 2020

The beta dispersion, which is the spread of betas on a stock market, can be interpreted as a measure of market vulnerability. This study examines the economic idea of the beta dispersion and its application as a market return predictor. Based on the empirical beta dispersion observed in the US...

Persistent link: https://www.econbiz.de/10012264452

Frequency-dependent higher moment risks

Baruník, Jozef; Kurka, Josef - 2021

Based on intraday data for a large cross-section of individual stocks and Exchange traded funds, we show that short-term as well as long-term fluctuations of realized market and average idiosyncratic higher moments risks are priced in the crosssectionof asset returns. Specifically, we find that...

Persistent link: https://www.econbiz.de/10012496742

Long-horizon asset and portfolio returns revisited : evidence from US markets

Tri Hoang - In: Cogent business & management 10 (2023) 2, pp. 1-16

-horizon returns and the negligible impacts of estimation errors on the expected returns. This study uses the innovative simulation … return distribution has the slowest rate of convergence to normality among groups of assets. Estimation errors of the … imprecisions persist over the investment horizons, the estimation errors of the monthly return have a strong effect on the …

Persistent link: https://www.econbiz.de/10014503297

Three Non-Gaussian Models of Dependence in Returns

Madan, Dilip B. - 2015

Three particular models of dependence in asset returns with non-Gaussian marginals are investigated on daily return data for sector exchange traded funds. The first model is a full rank Gaussian copula (FGC). The second models returns as a linear mixture of independent Lévy processes (LML). The...

Persistent link: https://www.econbiz.de/10013018786