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Article: Potential losses from incorporating return predictability into portfolio allocation

TitlePotential losses from incorporating return predictability into portfolio allocation
Authors
KeywordsBayesian robustness
Portfolio selection
Return predictability
Issue Date2013
PublisherAustralian Graduate School of Management. The Journal's web site is located at http://www.agsm.unsw.edu.au/eajm
Citation
Australian Journal of Management, 2013, v. 39 n. 1, p. 35-45 How to Cite?
AbstractThe extant literature demonstrates the importance of stock return predictability for portfolio allocation. The usefulness of incorporating return predictability into portfolio decisions is most evident for Bayesian investors who build their portfolios based on their prior beliefs. I show that the magnitude of economic significance of stock return predictability largely depends on the choice of prior beliefs. An investor could suffer substantial utility loss when he delegates portfolio management to a manager with a different belief about stock return predictability. The consideration of Bayesian prior robustness in portfolio analysis can be as important as return predictability itself.
Persistent Identifierhttp://hdl.handle.net/10722/164717
ISSN
2015 Impact Factor: 1.4
2015 SCImago Journal Rankings: 0.841
ISI Accession Number ID

 

DC FieldValueLanguage
dc.contributor.authorTang, Yen_US
dc.date.accessioned2012-09-20T08:08:42Z-
dc.date.available2012-09-20T08:08:42Z-
dc.date.issued2013en_US
dc.identifier.citationAustralian Journal of Management, 2013, v. 39 n. 1, p. 35-45en_US
dc.identifier.issn0312-8962-
dc.identifier.urihttp://hdl.handle.net/10722/164717-
dc.description.abstractThe extant literature demonstrates the importance of stock return predictability for portfolio allocation. The usefulness of incorporating return predictability into portfolio decisions is most evident for Bayesian investors who build their portfolios based on their prior beliefs. I show that the magnitude of economic significance of stock return predictability largely depends on the choice of prior beliefs. An investor could suffer substantial utility loss when he delegates portfolio management to a manager with a different belief about stock return predictability. The consideration of Bayesian prior robustness in portfolio analysis can be as important as return predictability itself.-
dc.languageengen_US
dc.publisherAustralian Graduate School of Management. The Journal's web site is located at http://www.agsm.unsw.edu.au/eajm-
dc.relation.ispartofAustralian Journal of Managementen_US
dc.subjectBayesian robustness-
dc.subjectPortfolio selection-
dc.subjectReturn predictability-
dc.titlePotential losses from incorporating return predictability into portfolio allocationen_US
dc.typeArticleen_US
dc.identifier.emailTang, Y: yjtang@hku.hken_US
dc.identifier.authorityTang, Y=rp01096en_US
dc.identifier.doi10.1177/0312896212462226-
dc.identifier.hkuros206840en_US
dc.identifier.isiWOS:000331274600003-
dc.publisher.placeAustralia-

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