Evaluating Portfolio Performance with Stochastic Discount Factors
AbstractThis paper provides evidence on the use of stochastic discount factors in the evaluation of portfolio performance. First, we discuss evaluation in this setting, and relate it to traditional mean-variance analysis. We then use Monte Carlo experiments to examine the small sample properties of generalized method of moment (GMM) estimators. Both size and power properties are characterized for various GMM approaches. Finally, we apply the methodology to Swedish-based mutual funds. We offer an evaluation allowing for passive as well as dynamic strategies. The conditional evaluation indicates that funds may have had superior performance over the sample period.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1663.
Date of creation: Jun 1997
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- Dahlquist, Magnus & Soderlind, Paul, 1999. "Evaluating Portfolio Performance with Stochastic Discount Factors," The Journal of Business, University of Chicago Press, vol. 72(3), pages 347-83, July.
- Dahlquist, Magnus & Söderlind, Paul, 1997. "Evaluating Portfolio Performance with Stochastic Discount Factors," Working Paper Series in Economics and Finance 175, Stockholm School of Economics, revised 01 Sep 1998.
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
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