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We present a new method of estimating the asset stochastic volatility and return. In doing so, we overcome some of the limitations of the existing random walk models, such as the GARCH/ARCH models.
In this article, we introduce a new measure for the marginal contribution of each view to the expected tracking error volatility (TEV). Our findings are obtained in the Bayesian framework proposed by Black and Litterman (1990, 1992) considering both a world with and without constraints in the...
Conventional wisdom in portfolio diversification has always advocated diversification across countries rather than across industries due to low degrees of correlations among the stock markets around the globe. In recent years, with an increase in correlation among markets around the world,...
Estimation theory has shown, owing to the limited estimation window available for real asset data, that the sample-based Markowitz mean-variance approach produces unreliable weights that fluctuate substantially over time. This article proposes an alternate approach to portfolio optimization,...
This article is concerned with a portfolio optimization problem subject to a transfer coefficient constraint, which is intended to generate an enhanced index portfolio with a good ex-post performance. We will show that a standard mean-tracking error model with transfer coefficient constraint can...
This article shows from the viewpoint of a European investor whether the performance parameters of several investment strategies are mainly due to returns of foreign markets or through the exchange rate development. In addition to the analysis in mean-variance terms, it will be evaluated how...
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