Portfolio performance gauging in discrete time using a Luenberger productivity indicator
AbstractThis paper proposes a pragmatic, discrete time indicator to gauge the performance of portfolios over time. Integrating the shortage function (Luenberger, 1995) into a Luenberger portfolio productivity indicator (Chambers, 2002), this study estimates the changes in the relative positions of portfolios with respect to the traditional Markowitz mean-variance efficient frontier, as well as the eventual shifts of this frontier over time. Based on the analysis of local changes relative to these mean-variance and higher moment (in casu, mean-variance-skewness and mean-variance-skewness-kurtosis) frontiers, this methodology allows to neatly separate between on the one hand performance changes due to portfolio strategies and on the other hand performance changes due to the market evolution. This methodology is empirically illustrated using a mimicking portfolio approach ([Fama and French, 1996] and [Fama and French, 1997]) using US monthly data from January 1931 to August 2007.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Banking & Finance.
Volume (Year): 34 (2010)
Issue (Month): 8 (August)
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Web page: http://www.elsevier.com/locate/jbf
Shortage function Mean-variance Mean-variance-skewness Mean-variance-skewness-kurtosis Efficient portfolios Luenberger portfolio productivity indicator;
Other versions of this item:
- Olivier Brandouy & Walter Briec & Kristiaan Kerstens & Ignace Van de Woestyne, 2008. "Portfolio Performance Gauging in Discrete Time Using a Luenberger Productivity Indicator," Working Papers 2008-ECO-12, IESEG School of Management, revised Oct 2009.
- Brandouy, Olivier & Briec, Walter & Kerstens, Kristiaan, 2008. "Portfolio performance gauging in discrete time using a Luenberger productivity indicator," Working Papers 2008/60, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
- C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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