Evaluating Portfolio Performance with Stochastic Discount Factors

Magnus Dahlquist and Paul Söderlind

No 1663, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper provides evidence on the use of stochastic discount factors in the evaluation of portfolio performance. First, we discuss evaluation in this setting, and relate it to traditional mean-variance analysis. We then use Monte Carlo experiments to examine the small sample properties of generalized method of moment (GMM) estimators. Both size and power properties are characterized for various GMM approaches. Finally, we apply the methodology to Swedish-based mutual funds. We offer an evaluation allowing for passive as well as dynamic strategies. The conditional evaluation indicates that funds may have had superior performance over the sample period.

Keywords: GMM estimators; intersection and spanning tests; mean-variance analysis; mutual funds; small sample properties (search for similar items in EconPapers)
JEL-codes: G11 G12 G23 (search for similar items in EconPapers)
Date: 1997-06
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Evaluating Portfolio Performance with Stochastic Discount Factors (1999)
Working Paper: Evaluating Portfolio Performance with Stochastic Discount Factors (1998)
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