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Mean–variance dominant trading strategies

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  • Galvani, Valentina
  • Gubellini, Stefano

Abstract

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.

Suggested Citation

  • Galvani, Valentina & Gubellini, Stefano, 2013. "Mean–variance dominant trading strategies," Finance Research Letters, Elsevier, vol. 10(3), pages 142-150.
  • Handle: RePEc:eee:finlet:v:10:y:2013:i:3:p:142-150
    DOI: 10.1016/j.frl.2013.05.005
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    References listed on IDEAS

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    More about this item

    Keywords

    Trading strategies; Mean variance; Conditional spanning tests;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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