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Parametric Portfolio Policies with Common Volatility Dynamics

Listed author(s):
  • Yunus Emre Ergemen

    ()

    (Aarhus University and CREATES)

  • Abderrahim Taamouti

    ()

    (Durham University Business School)

A parametric portfolio policy function is considered that incorporates common stock volatility dynamics to optimally determine portfolio weights. Reducing dimension of the traditional portfolio selection problem significantly, only a number of policy parameters corresponding to first- and second-order characteristics are estimated based on a standard method-of-moments technique. The method, allowing for the calculation of portfolio weight and return statistics, is illustrated with an empirical application to 30 U.S. industries to study the economic activity before and after the recent financial crisis.

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File URL: ftp://ftp.econ.au.dk/creates/rp/15/rp15_41.pdf
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Paper provided by Department of Economics and Business Economics, Aarhus University in its series CREATES Research Papers with number 2015-41.

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Length: 22
Date of creation: 26 Aug 2015
Handle: RePEc:aah:create:2015-41
Contact details of provider: Web page: http://www.econ.au.dk/afn/

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  1. Fama, Eugene F. & French, Kenneth R., 2015. "A five-factor asset pricing model," Journal of Financial Economics, Elsevier, vol. 116(1), pages 1-22.
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