Applied mean-ETL optimization in using earnings forecasts

Barret Pengyuan Shao, Svetlozar T. Rachev and Yu Mu

International Journal of Forecasting, 2015, vol. 31, issue 2, 561-567

Abstract: In this article, we apply the mean-expected tail loss (ETL) portfolio optimization to the consensus temporary earnings forecasting (CTEF) data from global equities. The time series model with multivariate normal tempered stable (MNTS) innovations is used to generate the out-of-sample scenarios for the portfolio optimization. We find that (1) the CTEF variable continues to be of value in portfolio construction, (2) the mean-ETL portfolio optimization produces statistically significant active returns, and (3) the active returns generated in the mean-ETL portfolio with CTEF indicate a statistically significant stock selection.

Keywords: Consensus temporary earnings forecasting; Multivariate normal tempered stable distribution; Mean-expected tail loss optimization (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:31:y:2015:i:2:p:561-567

DOI: 10.1016/j.ijforecast.2014.10.005

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