Least Squares Predictions and Mean-Variance Analysis
Enrique Sentana
No 2088, CEPR Discussion Papers from C.E.P.R. Discussion Papers
Abstract:
We compare the Sharpe ratios of investment funds which combine one riskless and one risky asset following: i) timing strategies which forecast excess returns using simple regressions; ii) a strategy which uses multiple regression instead; and iii) a passive allocation which combines the funds in i) with constant weightings. We show that iii) dominates i) and ii), as it implicitly uses the linear forecasting rule that maximises the Sharpe ratio of actively traded portfolios, but the relative ranking of i) and ii) is generally unclear. We also discuss under what circumstances the performance of ii) and iii) coincides.
Keywords: Forecasting; Market timing strategies; Portfolio Allocation; Sharpe Ratios (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Date: 1999-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2088 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
Related works:
Journal Article: Least Squares Predictions and Mean-Variance Analysis (2005) 
Working Paper: Least Squares Predictions and Mean-Variance Analysis (1999) 
Working Paper: Least Squares Predictions and Mean-Variance Analysis (1997)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:2088
Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=2088
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().