Approximating the growth optimal portfolio with a diversified world stock index
Purpose – This paper aims to construct and compare various total-return world stock indices based on daily data. Design/methodology/approach – Because of diversification, these indices are noticeably similar. A diversification theorem identifies any diversified portfolio as a proxy for the growth optimal portfolio. Findings – The paper constructs a diversified world stock index that outperforms a number of other indices and argues that it is a good proxy for the growth optimal portfolio. Originality/value – The diversified world stock index has applications to derivative pricing and investment management.
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Volume (Year): 7 (2006)
Issue (Month): 5 (November)
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References listed on IDEAS
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- Eckhard Platen, 2005. "On The Role Of The Growth Optimal Portfolio In Finance," Australian Economic Papers, Wiley Blackwell, vol. 44(4), pages 365-388, December.
- Eckhard Platen, 2004.
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- Eckhard Platen, 2004. "Diversified Portfolios with Jumps in a Benchmark Framework," Research Paper Series 129, Quantitative Finance Research Centre, University of Technology, Sydney.
- Jorion, Philippe, 1986. "Bayes-Stein Estimation for Portfolio Analysis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 21(03), pages 279-292, September.
- Eckhard Platen, 2003. "Modeling the Volatility and Expected Value of a Diversified World Index," Research Paper Series 103, Quantitative Finance Research Centre, University of Technology, Sydney.
- Kevin Fergusson & Eckhard Platen, 2006.
"On the Distributional Characterization of Daily Log-Returns of a World Stock Index,"
Applied Mathematical Finance,
Taylor & Francis Journals, vol. 13(1), pages 19-38.
- Kevin Fergusson & Eckhard Platen, 2005. "On the Distributional Characterization of Log-returns of a World Stock Index," Research Paper Series 153, Quantitative Finance Research Centre, University of Technology, Sydney.
- Eckhard Platen, 2004. "Capital Asset Pricing for Markets with Intensity Based Jumps," Research Paper Series 143, Quantitative Finance Research Centre, University of Technology, Sydney.
- Markowitz, Harry M, 1976. "Investment for the Long Run: New Evidence for an Old Rule," Journal of Finance, American Finance Association, vol. 31(5), pages 1273-86, December.
- Angel Pardo & Roberto Pascual, 2012. "On the hidden side of liquidity," The European Journal of Finance, Taylor & Francis Journals, vol. 18(10), pages 949-967, November.
- Eckhard Platen, 2006.
"A Benchmark Approach To Finance,"
Wiley Blackwell, vol. 16(1), pages 131-151.
- Luenberger, David G., 1997. "Investment Science," OUP Catalogue, Oxford University Press, number 9780195108095, December.
- Norbert Hofmann & Eckhard Platen, 2000. "Approximating Large Diversified Portfolios," Mathematical Finance, Wiley Blackwell, vol. 10(1), pages 77-88.
- Long, John Jr., 1990. "The numeraire portfolio," Journal of Financial Economics, Elsevier, vol. 26(1), pages 29-69, July.
- Eckhard Platen, 2001. "Arbitrage in Continuous Complete Markets," Research Paper Series 72, Quantitative Finance Research Centre, University of Technology, Sydney.
- Lim Kian Guan & Liu Xiaoqing & Tsui Kai Chong, 2004. "Asymptotic dynamics and value-at-risk of large diversified portfolios in a jump-diffusion market," Quantitative Finance, Taylor & Francis Journals, vol. 4(2), pages 129-139.
- Aitken, Michael J. & Berkman, Henk & Mak, Derek, 2001. "The use of undisclosed limit orders on the Australian Stock Exchange," Journal of Banking & Finance, Elsevier, vol. 25(8), pages 1589-1603, August.
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