Mimicking Portfolios with Conditioning Information

Wayne Ferson (), Andrew F. Siegel and Pisun (Tracy) Xu

No 11020, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Mimicking portfolios have long been useful in asset pricing research. In most empirical applications, the portfolio weights are assumed to be fixed over time, while in theory they may be functions of the economic state. This paper derives and characterizes mimicking portfolios in the presence of predetermined state variables, or conditioning information. The results generalize and integrate multifactor minimum variance efficiency (Fama, 1996) with conditional and unconditional mean variance efficiency (Hansen and Richard (1987), Ferson and Siegel, 2001). Empirical examples illustrate the potential importance of time-varying mimicking portfolio weights and highlight challenges in their application.

JEL-codes: G1 G10 G11 G12 G14 (search for similar items in EconPapers)
Date: 2005-01
New Economics Papers: this item is included in nep-fin and nep-fmk
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published as Ferson, Wayne, Andrew F. Siegel and Pisun Xu. "Mimicking Portfolios With Conditional Information," Journal of Financial and Quantitative Analysis, 2006, v41(3,Sep), 607-635.

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