A Comparative Analysis of Ability of Mimicking Portfolios in Representing the Background Factors
AbstractOur aim is to give a comparative analysis of ability of different factor mimicking portfolios in representing the background factors. Our analysis contains a cross-sectional regression approach, a time-series regression approach and a portfolio approach for constructing factor mimicking portfolios. The focus of the analysis is the power of mimicking portfolios in the asset pricing models. We conclude that the time series regression approach, with the book-to-market sorted portfolios as the base assets, is the most proper alternative to construct mimicking portfolios for factors for which a time-series of factor realisation is available. To construct mimicking portfolios based on the firm characteristics we suggest a loading weighted portfolio approach.
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Bibliographic InfoPaper provided by Lund University, Department of Economics in its series Working Papers with number 2004:10.
Length: 35 pages
Date of creation: 11 Mar 2004
Date of revision:
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Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
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Web page: http://www.nek.lu.se/en
More information through EDIRC
mimicking portfolio; asset pricing; cross-sectional regression approach; time series regression approach;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-03-14 (All new papers)
- NEP-FIN-2004-03-14 (Finance)
- NEP-RMG-2004-03-14 (Risk Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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