Most of previous work on robust equity portfolio optimization has focused on its formulation and performance. In contrast, in this paper we analyze the behavior of robust equity portfolios to determine whether reducing the sensitivity to input estimation errors is all robust models do and investigate any side-effects of robust formulations. Therefore, our focus is on the relationship between fu...

Approaches to describing the behavior ofstock prices were long dominated by a simple model, a geometric random walk with uncorrelated innovations (Fama, 1970). An implication of this model is that stock returns are independent and identically distributed (iid) random variables. Early tests found little evidence of economically significant short-horizon autocorrelations and predictability, there...

This paper studies the behavior of idiosyncratic volatility for the post war period. Using aggregate idiosyncratic volatility statistics constructed from the Fama and French (1993) three-factor model, we find that the volatility of individual stocks appears to have increased over time. This trend is not solely attributed to the increasing prominence of the NASDAQ market. We go on to suggest tha...

Usually, the government offers two pension methods, a lumpsum buyout or an annual pension. In this paper, we provide effective method to evaluate these methods. Initially, constructed portfolio consisting of five popular assets, such as tech giants and ETFs. Then use Fama-French 3-factor model calculate expected returns every asset. The Sharpe Ratio is standard make choice that accepts with wit...

This paper features a statistical analysis of the monthly three factor Fama/French return series. Rolling OLS regressions explore relationship between 3 factors, using data from July 1926 to June 2018, available on French’s website. The results suggest there are significant and time-varying relationships factors. A sub-sample 1990 2018 is used analyze series two-stage least squares Hausman test...

Characterizing the instantaneous investment opportunity set by the real interest rate and the maximum Sharpe ratio, a simple model of time varying investment opportunities is posited in which these two variables follow correlated Ornstein-Uhlenbeck processes, and the implications for stock and bond valuation are developed. The model suggests that the prices of certain portfolios that are relate...

This paper proposes a functional-coefficient panel data model with cross-sectional dependence motivated by re-examining the empirical performance of conditional capital asset pricing model. In order to characterize time-varying property assets’ betas and alpha, our proposed allows be unknown functions some macroeconomic financial instruments. Moreover, common factor structure is introduced whic...

Zusammenfassung In a seminal study, Lettau et al. (2019) demonstrate that single macroeconomic factor can explain wide range of equity and nonequity portfolio returns within the U.S. market. This factor, which is based on growth in capital share aggregate income, able to outperform, yet even subsume information well-established models as for instance Fama-French three model. The aim this paper ...

Fama and French (1992) show conclusively that the relationship between cross-sectional stock return and beta is flat. Following Fama and French’s cross-sectional framework but allowing for up and down market conditions, Pettengill et al.’s (1995) constant-beta model and Howton and Peterson’s (1998) dual-beta model both find that beta is significantly positive (negative) in the up (down) markets...