A Conditional Asset Pricing Model with the Optimal Orthogonal Portfolio
(2011) In Journal of Banking & Finance 35(5). p.1027-1040- Abstract
- This paper employs a conditional asset-pricing model based on the optimal orthogonal portfolio approach to construct a factor portfolio that embodies all the latent factors important for pricing a given set of test assets. The advantage of this portfolio to the anomaly related mimicking portfolios is its ability to separate out the components of average return that are not related to the return covariation. The performance of this portfolio is evaluated against several conventional factors, using both cross-sectional and time-series regression approaches, as well as the Hansen and Jagannathan (1997) distance measure. Its strong out-of-sample results indicate that our suggested methodology may have important applications in risk management,... (More)
- This paper employs a conditional asset-pricing model based on the optimal orthogonal portfolio approach to construct a factor portfolio that embodies all the latent factors important for pricing a given set of test assets. The advantage of this portfolio to the anomaly related mimicking portfolios is its ability to separate out the components of average return that are not related to the return covariation. The performance of this portfolio is evaluated against several conventional factors, using both cross-sectional and time-series regression approaches, as well as the Hansen and Jagannathan (1997) distance measure. Its strong out-of-sample results indicate that our suggested methodology may have important applications in risk management, portfolio selection and performance evaluation. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/1671211
- author
- Asgharian, Hossein LU
- organization
- publishing date
- 2011
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- Optimal orthogonal portfolio, Factor pricing, Time-varying risk premium
- in
- Journal of Banking & Finance
- volume
- 35
- issue
- 5
- pages
- 1027 - 1040
- publisher
- Elsevier
- external identifiers
-
- wos:000289389900001
- scopus:79952752965
- ISSN
- 1872-6372
- DOI
- 10.1016/j.jbankfin.2010.09.017
- language
- English
- LU publication?
- yes
- id
- ab197294-c413-43eb-bb15-ca4920803798 (old id 1671211)
- date added to LUP
- 2016-04-01 10:52:16
- date last changed
- 2022-01-26 03:17:50
@article{ab197294-c413-43eb-bb15-ca4920803798,
abstract = {{This paper employs a conditional asset-pricing model based on the optimal orthogonal portfolio approach to construct a factor portfolio that embodies all the latent factors important for pricing a given set of test assets. The advantage of this portfolio to the anomaly related mimicking portfolios is its ability to separate out the components of average return that are not related to the return covariation. The performance of this portfolio is evaluated against several conventional factors, using both cross-sectional and time-series regression approaches, as well as the Hansen and Jagannathan (1997) distance measure. Its strong out-of-sample results indicate that our suggested methodology may have important applications in risk management, portfolio selection and performance evaluation.}},
author = {{Asgharian, Hossein}},
issn = {{1872-6372}},
keywords = {{Optimal orthogonal portfolio; Factor pricing; Time-varying risk premium}},
language = {{eng}},
number = {{5}},
pages = {{1027--1040}},
publisher = {{Elsevier}},
series = {{Journal of Banking & Finance}},
title = {{A Conditional Asset Pricing Model with the Optimal Orthogonal Portfolio}},
url = {{http://dx.doi.org/10.1016/j.jbankfin.2010.09.017}},
doi = {{10.1016/j.jbankfin.2010.09.017}},
volume = {{35}},
year = {{2011}},
}