This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Understanding Portfolio Efficiency with Conditioning Information

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Francisco Peñaranda ()
Abstract

Contrary to the classic framework of passive strategies, if investors exploit return predictability through active strategies then there is a tension between the mean-variance frontiers that drive empirical work and the mean-variance preferences that are used in finance theory. We show that standard preferences choose portfolios on a frontier that has not been studied in the literature, develop new betas and Sharpe ratios to construct portfolio efficiency tests, and highlight some concerns with current empirical work. An empirical application to active strategies on stock portfolios sorted by size and book-to-market confirms the relevance of our theoretical results.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.econ.upf.edu/docs/papers/downloads/1146.pdf
File Format: application/pdf
File Function: Whole Paper
Download Restriction: no

Publisher Info
Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1146.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Jan 2009
Date of revision:
Handle: RePEc:upf:upfgen:1146

Contact details of provider:
Web page: http://www.econ.upf.edu/

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords: Beta-pricing; Dynamic portfolio strategies; Jensen’s alpha; Mean-variance frontiers; Sharpe ratios;

Other versions of this item:

Find related papers by JEL classification:
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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.:
  1. Dybvig, Philip H & Ross, Stephen A, 1985. " Differential Information and Performance Measurement Using a Security Market Line," Journal of Finance, American Finance Association, vol. 40(2), pages 383-99, June. [Downloadable!] (restricted)
  2. Owen, Joel & Rabinovitch, Ramon, 1983. " On the Class of Elliptical Distributions and Their Applications to the Theory of Portfolio Choice," Journal of Finance, American Finance Association, vol. 38(3), pages 745-52, June. [Downloadable!] (restricted)
  3. Ferson, Wayne & Siegel, Andrew F. & Xu, Pisun (Tracy), 2006. "Mimicking Portfolios with Conditioning Information," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 41(03), pages 607-635, September. [Downloadable!]
  4. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February. [Downloadable!] (restricted)
  5. Chamberlain, Gary & Rothschild, Michael, 1983. "Arbitrage, Factor Structure, and Mean-Variance Analysis on Large Asset Markets," Econometrica, Econometric Society, vol. 51(5), pages 1281-304, September. [Downloadable!] (restricted)
    Other versions:
  6. Gibbons, Michael R & Ross, Stephen A & Shanken, Jay, 1989. "A Test of the Efficiency of a Given Portfolio," Econometrica, Econometric Society, vol. 57(5), pages 1121-52, September. [Downloadable!] (restricted)
  7. Wayne E. Ferson, 2001. "The Efficient Use of Conditioning Information in Portfolios," Journal of Finance, American Finance Association, vol. 56(3), pages 967-982, 06. [Downloadable!] (restricted)
Full references

Statistics
Access and download statistics

Did you know? You can create your own reading lists on IDEAS.

This page was last updated on 2009-11-6.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.