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Principal Portfolios
We propose a new asset pricing framework in which all securities' signals predict each individual return. While the literature focuses on securities' own-signal predictability, assuming equal strength across securities, our framework includes cross-predictability—leading to three main results. First, we derive the optimal strategy in closed form. It consists of eigenvectors of a “prediction matrix,” which we call “principal portfolios.” Second, we decompose the problem into alpha and beta, yielding optimal strategies with, respectively, zero and positive factor exposure. Third, we provide a new test of asset pricing models. Empirically, principal portfolios deliver significant out-of-sample alphas to standard factors in several data sets.
Ketersediaan
| Call Number | Location | Available |
|---|---|---|
| PSB lt.dasar - Pascasarjana (Koleksi Majalah) | 1 |
| Penerbit | USA: The American Finance Association 2023 |
|---|---|
| Edisi | Volume 78, Issue 1, February 2023, Pages 347-387 |
| Subjek | Securities Portfolio Asset pricing pricing model |
| ISBN/ISSN | 1540-6261 |
| Klasifikasi | NONE |
| Deskripsi Fisik | First Published : 14 December 2022 |
| Info Detail Spesifik | The Journal of Finance |
| Other Version/Related | Tidak tersedia versi lain |
| Lampiran Berkas |