Equity Portfolios with Improved Liability-Hedging Benefits

Guillaume Coqueret (), Lionel Martellini and Vincent Milhau
Additional contact information
Guillaume Coqueret: MRM - Montpellier Research in Management - UPVM - Université Paul-Valéry - Montpellier 3 - UPVD - Université de Perpignan Via Domitia - Groupe Sup de Co Montpellier (GSCM) - Montpellier Business School - UM - Université de Montpellier
Lionel Martellini: EDHEC - EDHEC Business School
Vincent Milhau: EDHEC-Risk Institute - EDHEC - EDHEC Business School - UCL - Université catholique de Lille

Post-Print from HAL

Abstract: This article analyzes whether it isdesirable andfeasible for an investor endowed with liabilities to hold an equity portfolio with better liability-hedging properties than a broad cap-weighted index. From a theoretical standpoint, the authors show that liability-driven investors will generally benefit from reducing the tracking error of their performance portfolios with respect to liabilities, unless this comes at an exceedingly large loss of performance. The authors then empirically document the heterogeneity of interest-rate-hedging properties across the constituents of the S&P 500 universe, and they show that substantial welfare gains can be achieved by selecting low-volatility and high-dividend-yield stocks. These benefits are further enhanced if a minimum-variance weighting scheme is applied to the selected stocks.

Keywords: Business And Economics; Business And Economics−Investments (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations:

Published in Journal of portfolio management, 2017, 43 (2), pp.37-49. ⟨10.3905/jpm.2017.43.2.037⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
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:hal:journl:hal-02009875

DOI: 10.3905/jpm.2017.43.2.037

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().