Portfolio Selection using New Factors based on Firm Characteristics

Sangwon Suh

Journal of Economic Development, 2018, vol. 43, issue 1, 77-99

Abstract: In this paper, we apply a new factor model to portfolio-selection problems and compare its portfolio investment performance with those of other popular portfolio-selection methods. The new factors are formed from a well-characterized subset of the asset universe based on firm characteristics and exhibit better asset-pricing performance than popular extant asset-pricing factors. The performance comparison shows that the new factors exhibit better portfolio investment performance than alternative methods for various test portfolios and various periods.

Keywords: Portfolio Selection; Asset Pricing Models; Mean-Variance Analysis; Sharpe Ratio; Firm Characteristics (search for similar items in EconPapers)
JEL-codes: C19 D60 I00 I32 I39 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:jed:journl:v:43:y:2018:i:1:p:77-99

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