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.
| Identifer | oai:union.ndltd.org:oulo.fi/oai:oulu.fi:nbnfioulu-201305201300 |
| Date | 23 May 2013 |
| Creators | Salehi, H. (Hamed) |
| Publisher | University of Oulu |
| Source Sets | University of Oulu |
| Language | English |
| Detected Language | English |
| Type | info:eu-repo/semantics/masterThesis, info:eu-repo/semantics/publishedVersion |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess, © Hamed Salehi, 2013 |
Page generated in 0.002 seconds