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Decomposing Performance

Listed author(s):
  • Hoechle, Daniel

    ()

  • Schmid, Markus

    ()

  • Zimmermann, Heinz

    ()

We present a new methodology for decomposing the (risk-adjusted) performance in empirical finance. Our technique offers the same straightforward economic intuition and all the statistical benefits of the portfolio sorts approach, in particular robustness to cross-sectional correlation, and in addition resolves the major drawbacks of portfolio sorts. Most importantly, our regression-based methodology handles multiple dimensions and continuous firm, fund, or investor characteristics. Moreover, the technique allows for relying on standard Wald-tests as an alternative to the popular Gibbons, Ross, and Shanken (1989) test. We illustrate our methodology with an asset pricing application and a long-horizon event study.

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File URL: http://ux-tauri.unisg.ch/RePEc/usg/sfwpfi/WPF-1216.pdf
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Paper provided by University of St. Gallen, School of Finance in its series Working Papers on Finance with number 1216.

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Length: 59 pages
Date of creation: Jun 2012
Date of revision: Nov 2015
Handle: RePEc:usg:sfwpfi:2012:16
Contact details of provider: Phone: +41 71 243 40 11
Fax: +41 71 243 40 40
Web page: http://www.unisg.ch/de/universitaet/schools/finance

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