An examination of linear factor models in country equity asset allocation strategies |
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Authors: | Jonathan Fletcher Joe Hillier |
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Institution: | aDepartment of Accounting and Finance, University of Strathclyde, Curran Building, 100 Cathedral Street, Glasgow G4 0LN, UK;bGlasgow Caledonian University, Glasgow, UK |
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Abstract: | We examine the out of sample performance of country equity asset allocation strategies between January 1985 and February 2000 that use conditional versions of international asset pricing models to forecast expected returns. We find that strategies that use conditional asset pricing models tend not to outperform a strategy that uses the sample mean to forecast expected returns. We find that this result is fairly robust across different levels of risk aversion, whether riskless lending is available or not, and when we impose upper bound constraints. |
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Keywords: | Factor models Asset allocation |
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