We apply an innovative bootstrap statistical technique to examine the performance of the U.S. equity mutual fund industry during the 1962 to 1994 period. Using this new method, we bootstrap the distribution of the performance measure (the... more
We apply an innovative bootstrap statistical technique to examine the performance of the U.S. equity mutual fund industry during the 1962 to 1994 period. Using this new method, we bootstrap the distribution of the performance measure (the "alpha") across mutual funds to determine whether funds with the best alphas are simply lucky, or whether managers of these funds possess genuine stockpicking skills---this bootstrap technique is necessary because of the complicated form of the distribution of alphas across funds and the non-normal nature of individual funds' alphas. Our results indicate that, controlling for luck, fund managers that pick stocks well enough to more than cover their costs do exist. That is, the distribution of alphas computed from bootstrapped fund returns (and assuming that no stockpicking talent exists) has a much smaller right tail than the distribution of alphas computed from actual fund returns. Unfortunately for investors, our bootstrap results a...
This paper proposes a new tractable approach to solving multiMperiod asset allocation probM lems. We assume that investor preferences are defined over moments of the terminal wealth distribution such as its skew and kurtosis.... more
This paper proposes a new tractable approach to solving multiMperiod asset allocation probM lems. We assume that investor preferences are defined over moments of the terminal wealth distribution such as its skew and kurtosis. TimeMvariations in investment opportunities ...
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Page 1. Strategic Asset Allocation and Consumption Decisions under Multivariate Regime Switching∗ Massimo Guidolin University of Virginia Allan Timmermann University of California San Diego August 9, 2005 Abstract This ...
... (2004) perform an exercise related to ours that using numerical methods applied to a version of the Lucas (1978) asset ... For a given dividend process, we follow Lucas (1978) and let asset prices be determined in equilibrium by the... more
... (2004) perform an exercise related to ours that using numerical methods applied to a version of the Lucas (1978) asset ... For a given dividend process, we follow Lucas (1978) and let asset prices be determined in equilibrium by the representative investor's first order conditions. ...
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... Dynamics under ayesian Learning Massimo Guidolin Allan Timmermann ... We wish to thank Alexander David, Jose Campa, Bernard Dumas, Claudio Michelacci, En-rique Sentana and seminar participants at Bocconi University, CEMFI, Federal... more
... Dynamics under ayesian Learning Massimo Guidolin Allan Timmermann ... We wish to thank Alexander David, Jose Campa, Bernard Dumas, Claudio Michelacci, En-rique Sentana and seminar participants at Bocconi University, CEMFI, Federal Reserve Bank of St. ...
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Abstract This paper uses a proprietary dataset to study two key shifts in the structure of the UK pension fund industry from 1984 to 2004. Specifically, most pension fund sponsors shifted from balanced managers (those managing across all... more
Abstract This paper uses a proprietary dataset to study two key shifts in the structure of the UK pension fund industry from 1984 to 2004. Specifically, most pension fund sponsors shifted from balanced managers (those managing across all asset classes) to specialist ...
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ABSTRACT This article examines the robustness of the evidence on predictability of US stock returns, and addresses the issue of whether this predictability could have been historically exploited by investors to earn profits in excess of a... more
ABSTRACT This article examines the robustness of the evidence on predictability of US stock returns, and addresses the issue of whether this predictability could have been historically exploited by investors to earn profits in excess of a buy-and-hold strategy in the market index. We ...
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ABSTRACT In this paper we utilize White's Reality Check bootstrap methodology (White (1999)) to evaluate simple technical trading rules while quantifying the data-snooping bias and fully adjusting for its effect in the context of the... more
ABSTRACT In this paper we utilize White's Reality Check bootstrap methodology (White (1999)) to evaluate simple technical trading rules while quantifying the data-snooping bias and fully adjusting for its effect in the context of the full universe from which the trading rules ...
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This paper presents evidence of persistent 'bull' and 'bear' regimes in UK stock and bond returns and considers their economic implications from the perspective of an investor's portfolio allocation. We find that... more
This paper presents evidence of persistent 'bull' and 'bear' regimes in UK stock and bond returns and considers their economic implications from the perspective of an investor's portfolio allocation. We find that the perceived state probability has a large effect on the optimal ...
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... DAVID BLAKE Birkbeck College, University of London ALLAN TIMMERMANN University of California, San Diego and London School of Economics⋆ ... Page 2. 58 DAVID BLAKE AND ALLANTIMMERMANN formance of UK mutual fund managers during the... more
... DAVID BLAKE Birkbeck College, University of London ALLAN TIMMERMANN University of California, San Diego and London School of Economics⋆ ... Page 2. 58 DAVID BLAKE AND ALLANTIMMERMANN formance of UK mutual fund managers during the period 19721995. ...
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These lecture notes codify extensive recent research on economic forecasting. When a forecast- ing model coincides with the mechanism generating the data (DGP) in an unchanging world, the theory of economic forecasting is well developed.... more
These lecture notes codify extensive recent research on economic forecasting. When a forecast- ing model coincides with the mechanism generating the data (DGP) in an unchanging world, the theory of economic forecasting is well developed. Forecasts are the conditional expectation, are un- biased, and no other predictor has a smaller mean-square forecast error matrix. Cointegration does not markedly alter that
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Empirical tests of forecast optimality have traditionally been conducted under the assumption of mean squared error loss or some other known loss function. In this article we establish new testable properties that hold when the... more
Empirical tests of forecast optimality have traditionally been conducted under the assumption of mean squared error loss or some other known loss function. In this article we establish new testable properties that hold when the forecaster's loss function is unknown but testable ...
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... modelling device. US GDP figures are currently only available quarterly, but economic forecasters can be assumed to employ higher frequency data when constructing their monthly forecasts of GDP. Giannone et al. (2008), for ...
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This paper finds strong evidence of time-variations in the joint distribution of returns on a stock market portfolio and portfolios tracking size-and value effects. Mean returns, volatilities and correlations between these equity... more
This paper finds strong evidence of time-variations in the joint distribution of returns on a stock market portfolio and portfolios tracking size-and value effects. Mean returns, volatilities and correlations between these equity portfolios are found to be driven by underlying regimes that ...
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This study examines evidence of instability in models of ex post predictable components in stock returns related to structural breaks in the coefficients of state variables such as the lagged dividend yield, short interest rate, term... more
This study examines evidence of instability in models of ex post predictable components in stock returns related to structural breaks in the coefficients of state variables such as the lagged dividend yield, short interest rate, term spread and default premium. We estimate linear models of ...
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... (2004) perform an exercise related to ours that using numerical methods applied to a version of the Lucas (1978) asset ... For a given dividend process, we follow Lucas (1978) and let asset prices be determined in equilibrium by the... more
... (2004) perform an exercise related to ours that using numerical methods applied to a version of the Lucas (1978) asset ... For a given dividend process, we follow Lucas (1978) and let asset prices be determined in equilibrium by the representative investor's first order conditions. ...
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This paper studies asset allocation decisions in the presence of regime switching in asset returns. We find evidence that four separate regimes characterized as crash, slow growth, bull and recovery states are required to capture the... more
This paper studies asset allocation decisions in the presence of regime switching in asset returns. We find evidence that four separate regimes characterized as crash, slow growth, bull and recovery states are required to capture the joint distribution of stock and bond ...
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ABSTRACT This paper proposes a new method for combining forecasts based on complete subset regressions. For a given set of potential predictor variables we combine forecasts from all possible linear regression models that keep the number... more
ABSTRACT This paper proposes a new method for combining forecasts based on complete subset regressions. For a given set of potential predictor variables we combine forecasts from all possible linear regression models that keep the number of predictors fixed. We explore how the choice of model complexity, as measured by the number of included predictor variables, can be used to trade off the bias and variance of the forecast errors, generating a setup akin to the efficient frontier known from modern portfolio theory. In an application to predictability of stock returns, we find that combinations of subset regressions can produce more accurate forecasts than conventional approaches based on equal-weighted forecasts (which fail to account for the dimensionality of the underlying models), combinations of univariate forecasts, or forecasts generated by methods such as bagging, ridge regression or Bayesian Model Averaging.
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Economics is primarily a non-experimental science. Typically, we cannot generate new data sets on which to test hypotheses independently of the data that may have led to a particular theory. The common practice of using the same data set... more
Economics is primarily a non-experimental science. Typically, we cannot generate new data sets on which to test hypotheses independently of the data that may have led to a particular theory. The common practice of using the same data set to formulate and test hypotheses ...