Author: Yihong Xia
Publisher:
ISBN:
Category : Asset allocation
Languages : en
Pages : 190

View

Book Description

Author: Yihong Xia
Publisher:
ISBN:
Category : Asset allocation
Languages : en
Pages : 418

View

Book Description

Author:
Publisher:
ISBN:
Category : Dissertations, Academic
Languages : en
Pages : 534

View

Book Description

Author: Dashan Huang
Publisher:
ISBN:
Category : Electronic dissertations
Languages : en
Pages : 134

View

Book Description
My research field is asset pricing with a focus on return predictability, innovation and market efficiency, and delegated investment management. In Chapter 1, "Maximum Return Predictability", I develop two theoretical upper bounds on the R2 of the regression of stock returns on predictive variables. Empirically, I found that the predictive R2s are significantly larger than the upper bounds, implying that existing asset pricing models are incapable of explaining the degree of return predictability. For example, the predictive R2 of the price dividend ratio for the U.S. market forecasting is 0.27% with monthly data. However, the theoretical upper bound is at most 0.07% with respect to CAPM, Fama-French three-factor model, CARA, habitat-formation model, long-run risk model, or rare disaster model. The finding of this paper suggests the development of new asset pricing models with new state variables that are highly correlated with stock returns. Recently, several papers found that the predictive power of almost all the existing macroeconomic variables exists only during economic recessions but does not exist over economic expansions. There perhaps have two reasons. First, existing predictors are individual economic variables and cannot capture the dynamics of the whole market. Second, the recognized predictive regression does not distinguish the varying ability of macro variables in forecasting the financial market. In Chapter 2, "Economic and Market Conditions: Two State Variables that Predict the Stock Market," Guofu Zhou and I identify two new predictors that capture the state of the economy and the state of the market condition, and found that the forecast of the market risk premium by the two predictors outperform a pooled forecast of dozens of existing predictors. Moreover, they forecast the stock market not only during down turns of the economy, but also during the up turns when other predictors fail. In decentralized investment management, there is always a friction between the principal and the manager. In Chapter 3, "The Servant of Two Masters: A Common Agency Explanation for Side-by-Side Management," I present a common agency model to study side-by-side (SBS) management in which a manager simultaneously manages two funds and separately contracts with the two different fund principals. The contracting is decentralized and includes two types of externalities: the manager's efforts are substitutable and the performance in one fund can generate a spillover effect on the other fund. The two principals can choose competition or free-riding. Under public contracting, competition is more likely to dominate free-riding. Under private contracting, however, free-riding becomes more important. In either case, SBS could generate better performance than standalone management.

Author: Herbert Dawid
Publisher: Springer Nature
ISBN: 3030529703
Category : Business & Economics
Languages : en
Pages : 244

View

Book Description
This book analyses decision-making in dynamic economic environments. By applying a wide range of methodological approaches, combining both analytical and computational methods, the contributors examine various aspects of optimal firm behaviour and relevant policy areas. Topics covered include optimal control, dynamic games, economic decision-making, and applications in finance and economics, as well as policy implications in areas such as pollution regulation. This book is dedicated to Christophe Deissenberg, a well-known and distinguished scholar of economic dynamics and computational economics. It appeals to academics in the areas of optimal control, dynamic games and computational economics as well as to decision-makers working in policy domains such as environmental policy.

Author: Söhnke M. Bartram
Publisher: CFA Institute Research Foundation
ISBN: 195292703X
Category : Business & Economics
Languages : en
Pages : 95

View

Book Description
Artificial intelligence (AI) has grown in presence in asset management and has revolutionized the sector in many ways. It has improved portfolio management, trading, and risk management practices by increasing efficiency, accuracy, and compliance. In particular, AI techniques help construct portfolios based on more accurate risk and return forecasts and more complex constraints. Trading algorithms use AI to devise novel trading signals and execute trades with lower transaction costs. AI also improves risk modeling and forecasting by generating insights from new data sources. Finally, robo-advisors owe a large part of their success to AI techniques. Yet the use of AI can also create new risks and challenges, such as those resulting from model opacity, complexity, and reliance on data integrity.

Author: Christoph Winter
Publisher:
ISBN:
Category :
Languages : en
Pages :

View

Book Description

Author: Daniele Bianchi
Publisher:
ISBN:
Category :
Languages : en
Pages : 30

View

Book Description
Using five alternative data sets and a range of specifications concerning the underlying linear predictability models, we study whether long-run dynamic optimizing portfolio strategies may actually outperform simpler benchmarks in out-of-sample tests. The dynamic portfolio problems are solved using a combination of dynamic programming and Monte Carlo methods. The benchmarks are represented by two typical fixed mix strategies: the celebrated equally-weighted portfolio and a myopic, Markowitz-style strategy that fails to account for any predictability in asset returns. Within a framework in which the investor maximizes expected HARA (constant relative risk aversion) utility in a frictionless market, our key finding is that there are enormous differences in optimal long-horizon (in-sample) weights between the mean-variance benchmark and the optimal dynamic weights. In out-of-sample comparisons, there is however no clear-cut, systematic, evidence that long-horizon dynamic strategies outperform naively diversified portfolios.

Author: Dal-Hee Lee
Publisher:
ISBN:
Category :
Languages : en
Pages : 208

View

Book Description

Author: John Y. Campbell
Publisher: OUP Oxford
ISBN: 019160691X
Category : Business & Economics
Languages : en
Pages : 272

View

Book Description
Academic finance has had a remarkable impact on many financial services. Yet long-term investors have received curiously little guidance from academic financial economists. Mean-variance analysis, developed almost fifty years ago, has provided a basic paradigm for portfolio choice. This approach usefully emphasizes the ability of diversification to reduce risk, but it ignores several critically important factors. Most notably, the analysis is static; it assumes that investors care only about risks to wealth one period ahead. However, many investors—-both individuals and institutions such as charitable foundations or universities—-seek to finance a stream of consumption over a long lifetime. In addition, mean-variance analysis treats financial wealth in isolation from income. Long-term investors typically receive a stream of income and use it, along with financial wealth, to support their consumption. At the theoretical level, it is well understood that the solution to a long-term portfolio choice problem can be very different from the solution to a short-term problem. Long-term investors care about intertemporal shocks to investment opportunities and labor income as well as shocks to wealth itself, and they may use financial assets to hedge their intertemporal risks. This should be important in practice because there is a great deal of empirical evidence that investment opportunities—-both interest rates and risk premia on bonds and stocks—-vary through time. Yet this insight has had little influence on investment practice because it is hard to solve for optimal portfolios in intertemporal models. This book seeks to develop the intertemporal approach into an empirical paradigm that can compete with the standard mean-variance analysis. The book shows that long-term inflation-indexed bonds are the riskless asset for long-term investors, it explains the conditions under which stocks are safer assets for long-term than for short-term investors, and it shows how labor income influences portfolio choice. These results shed new light on the rules of thumb used by financial planners. The book explains recent advances in both analytical and numerical methods, and shows how they can be used to understand the portfolio choice problems of long-term investors.