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A Generalization of the Calendar Time Portfolio Approach and the Performance of Private Investors

Author

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  • Hoechle, Daniel

    (University of Basel)

  • Zimmermann, Heinz

    (University of Basel)

Abstract

We present a regression-based generalization of the calendar time portfolio approach which allowsfor the inclusion of continuous and multivariate investor or firm characteristics in the analysis. Ourmethod is simple to apply and it ensures that the statistical results are heteroscedasticity consistentand robust to very general forms of cross-sectional and temporal dependence. Furthermore, ourregression-based technique also remedies several well-known weaknesses of the traditional calendartime portfolio approach. By considering a new, unique dataset on more than 40,000 Europeanprivate investors, we illustrate empirically that erroneously ignoring cross-sectional dependenceinherent in microeconometric panel data can lead to severely biased statistical results. Moreoverwe use our method to validate some of the most popular hypotheses on the performance of privateinvestors.

Suggested Citation

  • Hoechle, Daniel & Zimmermann, Heinz, 2007. "A Generalization of the Calendar Time Portfolio Approach and the Performance of Private Investors," Working papers 2007/14, Faculty of Business and Economics - University of Basel.
    • Handle: RePEc:bsl:wpaper:2007/14
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    Cited by:

    1. Rania Makni & Olfa Benouda & Ezzedine Delhoumi, 2016. "International evidence on Islamic equity fund characteristics and performance persistence," Review of Financial Economics, John Wiley & Sons, vol. 31(1), pages 75-82, November.
    2. Makni, Rania & Benouda, Olfa & Delhoumi, Ezzedine, 2016. "International evidence on Islamic equity fund characteristics and performance persistence," Review of Financial Economics, Elsevier, vol. 31(C), pages 75-82.
    3. Drobetz, Wolfgang & Erdmann, Thomas & Zimmermann, Heinz, 2007. "Predictability in the cross-section of European bank stock returns," Working papers 2007/21, Faculty of Business and Economics - University of Basel.

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    More about this item

    Keywords

    Performance measurement; Robust statistical inference; Cross-sectional dependence;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D1 - Microeconomics - - Household Behavior

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