A mean-variance portfolio optimization based on firm characteristics and its performance evaluation |
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Author: | Salehi, Hamed1 |
Organizations: |
1University of Oulu, Oulu Business School, Department of Finance, Finance |
Format: | ebook |
Version: | published version |
Access: | open |
Online Access: | PDF Full Text (PDF, 1.7 MB) |
Pages: | 65 |
Persistent link: | http://urn.fi/URN:NBN:fi:oulu-201305201300 |
Language: | English |
Published: |
Oulu :
H. Salehi,
2013
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Publish Date: | 2013-05-23 |
Thesis type: | Master's thesis |
Tutor: |
Kahra, Hannu |
Reviewer: |
Perttunen, Jukka Kahra, Hannu |
Description: |
A flexible and financially sensible methodology that takes quantifiable firm’s characteristics into account when constructing a portfolio inspired by Brandt et al. (2009) and Hjalmarsson and Manchev (2010) is described. The method imposes the weights to be a linear function of characteristics for investor that maximizes return and penalizes for amount of volatility and solves the optimization model with a statistical method suggested by Britten-Jones (1999). It is designed in a way to be dollar-and beta-neutral.
In order to exploit the information of some of the return-predictive factors with the described method, we form various single- and combined-factor strategies on a portfolio of 76 stocks out of FTSE100 in the period of January 2000 to October 2011 both in-sample and 60-rolling window out-of-sample. The results show that the designed strategies based on abnormal return, Jenson’s alpha and bootstrapped Sharpe-ratio lead to better performance in most of the designed strategies. Holding-based and expectation-based evaluation methods also support our results.
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Subjects: | |
Copyright information: |
© Hamed Salehi, 2013. This publication is copyrighted. You may download, display and print it for your own personal use. Commercial use is prohibited. |