Mean–variance dominant trading strategies

Valentina Galvani and Stefano Gubellini

Finance Research Letters, 2013, vol. 10, issue 3, 142-150

Abstract: The paper examines the relative importance of ten anomaly-based trading strategies. We employ Mean Variance spanning methodologies in a classical unconditional setting and a novel conditional setting. Fixed-weight optimal portfolios stemming from the unconditional methodology indicate that all the strategies are needed to enhance the mean–variance tradeoff. This conclusion is completely reversed when we allow for time-varying portfolio weights as a nonlinear function of lagged economic indicators. The overall results suggest that diversified anomaly-based holdings are of limited benefit to sophisticated investors who employ dynamic trading strategies.

Keywords: Trading strategies; Mean variance; Conditional spanning tests (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:10:y:2013:i:3:p:142-150

DOI: 10.1016/j.frl.2013.05.005

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