Realized portfolio selection in the euro area

Claudio Morana

ICER Working Papers - Applied Mathematics Series from ICER - International Centre for Economic Research

Abstract: A new approach to mean-variance efficient portfolio selection is introduced. The method is based on realized regression theory and the regression based portfolio selection approach of Britten-Jones (1999), yielding a conditional version of the Britten-Jones (1999) method. Application to euro area stock markets diversi?cation, differently from other standard approaches, actually yields a balanced and stable allocation of wealth, free from the problem of corner solutions, suggesting that diversi?cation among euro area stock markets is still be feasible and desirable. Evidence that the monetary union may have had a much less important impact on the integration of euro area equity markets, as well as that the latter is still in progress, is provided.

Keywords: asset allocation; portfolio choice; stock market integration; international diversi?cation; euro area; realized regression. (search for similar items in EconPapers)
JEL-codes: C13 C22 F30 G11 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2008-06
New Economics Papers: this item is included in nep-eec
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