Skip navigation
SuUB logo
DSpace logo

  • Home
  • Institutions
    • University of Bremen
    • City University of Applied Sciences
    • Bremerhaven University of Applied Sciences
  • Sign on to:
    • My Media
    • Receive email
      updates
    • Edit Account details

Citation link: https://media.suub.uni-bremen.de/handle/elib/5286

Publisher DOI: https://doi.org/10.1108/JRF-02-2016-0026
 
copyright

An investor’s perspective on risk-models and characteristic-models


Other Titles: Risikomodelle und Eigenschaftsmodelle aus der Sicht eines Anlegers
Authors: Fieberg, Christian  
Poddig, Thorsten 
Varmaz, Armin  
Abstract: 
Purpose – In capital markets, research risk factor loadings and characteristics are considered as opposing explanations for the cross-sectional dispersion in average stock returns. However, there is little known about the performance an investor would obtain who believes either in the characteristics explanation (CB-investor) or in the risk factor loadings explanation (RB-investor). The purpose of this paper is to compare the performance of CB- and RB-investors.
Design/methodology/approach – To compare the competing strategies, the authors propose a simple new approach to equity portfolio optimization in the style of Brandt et al. (2009) by modeling the portfolio weight in each asset as a function of the asset’s risk factor loadings or characteristics. The authors perform an empirical analysis on the German stock market, exploiting the risk factor loadings from the Carhart (1997) four-factor model and the respective characteristics size,
book-to-market equity ratio and momentum.
Findings – The results show that investment strategies relying on characteristics (particularly on momentum) outperform risk-based investment strategies in horse races. These findings hold in- and out-of-sample. Furthermore, the characteristics-based investment strategies outperform a value-weighted market portfolio strategy in- and out-of-sample.
Originality/value – The authors introduce a portfolio optimization approach that enables investors to directly link portfolio decisions to the firm’s characteristics or risk factor loadings.
Keywords: Asset allocation; Characteristic model; German stock market; Risk model
Issue Date: 27-Mar-2016
Journal/Edited collection: The Journal of Risk Finance 
Start page: 262
End page: 276
Note: 3
Band: 17
Type: Artikel/Aufsatz
ISSN: 1526-5943
Institution: Hochschule Bremen 
Faculty: Hochschule Bremen / Fakultät Wirtschaftswissenschaften 
Institute: School of International Business (SiB) 
Appears in Collections:Bibliographie HS Bremen

  

Page view(s)

35
checked on May 28, 2022

Google ScholarTM

Check


Items in Media are protected by copyright, with all rights reserved, unless otherwise indicated.

Legal notice -Feedback -Data privacy
Media - Extension maintained and optimized by Logo 4SCIENCE