University of Sussex
Browse

File(s) not publicly available

Sources of outperformance in equity markets

journal contribution
posted on 2023-06-08, 12:22 authored by Carol AlexanderCarol Alexander, Anca Dimitriu
The general portfolio construction model described here is designed to replicate the first principal component of a group of stocks instead of a traditional benchmark, thus capturing only the common trend in stock returns. Reduction of the noise in stock returns facilitates the replication considerably, and the optimal portfolio structure is very stable. Analysis of the portfolio performance over different time horizons in European and U.S. equity markets reveals a time-varying structure. Throughout most of the period studied, the portfolio’s value component dominated the market and the volatility components, but during the volatile periods of the last few years the strategy earned a significant volatility premium. One explanation for the mean-reversion is behavioral; portfolio performance is influenced by the extent of investor herding toward the common trend in stock returns.

History

Publication status

  • Published

Journal

Journal of Portfolio Management

ISSN

0095-4918

Publisher

Institutional Investor Inc

Issue

4

Volume

30

Page range

170-185

Department affiliated with

  • Business and Management Publications

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2012-09-26

Usage metrics

    University of Sussex (Publications)

    Categories

    No categories selected

    Exports

    RefWorks
    BibTeX
    Ref. manager
    Endnote
    DataCite
    NLM
    DC