We study the construction of long-short portfolios on the basis of cross-sectional return predictions. We derive an optimal portfolio construction procedure that takes the form of a return classification rule.
- Speaker
- Date
- Thursday 24 Apr 2025, 12:00 - 13:00
- Type
- Seminar
- Room
- ET-14
- Location
- Campus Woudestein
Selecting stocks on the basis of expected return predictions, the standard practice in the literature, is also optimal in special cases of the general framework.
An empirical application to US stocks highlights that the portfolios constructed using the proposed procedure outperform portfolios constructed using the standard tools in the literature, and the outperformance persists when transaction costs are duly accounted for.
See also
- More information
Do you want to know more about the event? Contact the secretariat Econometrics at eb-secr@ese.eur.nl.
