Towards reliable efficient frontiers

Schöttle, Katrin; Werner, Ralf

doi:10.1057/palgrave.jam.2240208

Cited by 21 publications

(7 citation statements)

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“…This assumption establishes the upper bound for B h,h+j . In particular, for the specific case of j → ∞, Σ −1 h+j µ h+j → Σ −1 µ, and in turn B h,h+j = θ < B h,h ; see Schottle and Werner (2006).…”

Section: A Characterizing the Multiperiod Utility Lossmentioning

confidence: 99%

Parameter Uncertainty in Multiperiod Portfolio Optimization with Transaction Costs

DeMiguel¹,

Martín-Utrera²,

Nogales³

2015

J. Financ. Quant. Anal.

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We study the impact of parameter uncertainty on the expected utility of a multiperiod investor subject to quadratic transaction costs. We characterize the utility loss associated with ignoring parameter uncertainty, and show that it is equal to the product between the single-period utility loss and another term that captures the effects of the multiperiod mean-variance utility and transaction cost losses. To mitigate the impact of parameter uncertainty, we propose two multiperiod shrinkage portfolios and demonstrate with simulated and empirical data sets that they substantially outperform portfolios that ignore parameter uncertainty, transaction costs, or both.

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Section: A Characterizing the Multiperiod Utility Lossmentioning

confidence: 99%

Parameter Uncertainty in Multiperiod Portfolio Optimization with Transaction Costs

DeMiguel¹,

Martín-Utrera²,

Nogales³

2015

J. Financ. Quant. Anal.

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show abstract

“…The rationale is that the shape of classical mean-variance frontier (MVF) and the location of efficient portfolios change drastically across multiple regimes (Sch¨ottle and Werner, 2006). The investors at this point may use dynamic strategies by systematically adjusting allocations according to the state-dependent mean variance frontiers.…”

Section: Factor Regimesmentioning

confidence: 99%

The role of Islamic asset classes in the diversified portfolios: Mean variance spanning test

Dewandaru

Masih

Bacha

et al. 2017

Emerging Markets Review

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This study investigates both conventional and Islamic investors' problems as to whether the inclusion of Islamic and conventional asset classes may expand the frontier of their respective portfolios. Our sample covers the global U.S. portfolios and Malaysian portfolios with multiple asset classes, as well as the portfolios with a specific asset class in several regions. This study uses the recent mean-variance spanning test in multiple regimes, which not only accounts for tail risk but also identifies the source of value added (tangency portfolio or global minimum variance).For intra-asset allocation, our findings show that both Islamic and conventional fund managers of a specific asset class can benefit from conventional and Islamic asset classes, respectively, in several regimes. For inter-asset allocation, conventional institutional investors cannot obtain any value added from Islamic asset classes. On the contrary, the U.S. Islamic institutional investors can expand their tangency portfolio by investing in U.S. TIPSs and REITs, and reduce their global minimum variance by allocating on U.S. high-yield bonds. Moreover, the Malaysian Islamic institutional investors can obtain risk reduction by investing in conventional bonds only in the high term premium regime. For the remaining asset classes, the opportunity sets are sufficient for Islamic investors to invest complying with Shariah rules. We provide some policy implications for the global Islamic financial industry.

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“…This assumption establishes the upper bound for B h,h+j . In particular, for the specific case of j → ∞, Σ −1 h+j μ h+j → Σ −1 μ, and in turn B h,h+j = θ < B h,h (see Schottle and Werner (2006)). …”

Section: Characterizing the Multiperiod Utility Lossmentioning

confidence: 99%

Parameter Uncertainty in Multi-Period Portfolio Optimization With Transaction Costs

2013

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Towards reliable efficient frontiers

Cited by 21 publications

References 0 publications

Parameter Uncertainty in Multiperiod Portfolio Optimization with Transaction Costs

Parameter Uncertainty in Multiperiod Portfolio Optimization with Transaction Costs

The role of Islamic asset classes in the diversified portfolios: Mean variance spanning test

Parameter Uncertainty in Multi-Period Portfolio Optimization With Transaction Costs

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