Stock Return Serial Dependence and Out-of-Sample Portfolio Performance

Victor DeMiguel, Raman Uppal, Francisco J. Nogales: The authors study whether investors can exploit stock return serial dependence to improve out-ofsample portfolio performance.

Author(s):

Victor DeMiguel

London Business School

Francisco J. Nogales

Universidad Carlos III

Raman Uppal

EDHEC Business School

To do this, they first show that a vector-autoregressive (VAR) model estimated with ridge regression captures daily stock return serial dependence in a stable manner. Second, they characterize (analytically and empirically) expected returns of VAR-based arbitrage portfolios, and show that they compare favorably to those of existing arbitrage portfolios. Third, they evaluate the performance of VAR-based investment (positive-cost) portfolios. They show that, subject to a suitable norm constraint, these portfolios outperform the traditional (unconditional) portfolios for transaction costs below 10 basis points.
Pdf
Stock Return Serial Dependence and Out-of-Sample Portfolio Performance...
(-1.00 B)
Type: Working paper
Date: le 08/04/2013
Extra information : For more information, please contact EDHEC Research and Development Department [ research@drd.edhec.edu ]
Research Cluster : Finance

See Also

How To: 8 tips for choosing your MBA
News
- 08-03-2019
Embarking on an MBA can be life-changing. It’s also an investment on many levels; you’...
European Excellence and Make an Impact Scholarships available for September 2019 Intake
News
- 07-03-2019
Two New Scholarship Programmes for 2019 EDHEC Business School has added two new Global...
Paper co-authored by Lionel Martellini and Vincent Milhau wins the 20th Annual Bernstein Fabozzi/Jacobs Levy Award for Outstanding Article from the Journal of Portfolio Management
News
- 04-03-2019
The paper, entitled "Proverbial Baskets Are Uncorrelated Risk Factors! A Factor-Based...
One life, one journey - Hard work and dedication pay off
News
- 04-03-2019
Temitope Ayorinde, a 2018 Master in Management, Business Management graduate, left his...