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Mean–variance dominant trading strategies

  • Galvani, Valentina
  • Gubellini, Stefano

The paper examines the relative importance of ten anomaly-based trading strategies. We employ Mean Variance spanning methodologies in a classical unconditional setting and a novel conditional setting. Fixed-weight optimal portfolios stemming from the unconditional methodology indicate that all the strategies are needed to enhance the mean–variance tradeoff. This conclusion is completely reversed when we allow for time-varying portfolio weights as a nonlinear function of lagged economic indicators. The overall results suggest that diversified anomaly-based holdings are of limited benefit to sophisticated investors who employ dynamic trading strategies.

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Article provided by Elsevier in its journal Finance Research Letters.

Volume (Year): 10 (2013)
Issue (Month): 3 ()
Pages: 142-150

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Handle: RePEc:eee:finlet:v:10:y:2013:i:3:p:142-150
Contact details of provider: Web page: http://www.elsevier.com/locate/frl

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