| 来源类型 | Discussion paper
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| 规范类型 | 论文
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| 来源ID | DP5134
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| DP5134 Voting Rules and Budget Allocation in an Enlarged EU |
| Mika Widgren; Heikki Kauppi
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| 发表日期 | 2005-07-23
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| 出版年 | 2005
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| 语种 | 英语
|
| 摘要 | In this paper, we show how an investor can incorporate uncertainty about expected returns when choosing a mean-variance optimal portfolio. In contrast to the Bayesian approach to estimation error, where there is only a single prior and the investor is neutral to uncertainty, we consider the case where the investor has multiple priors and is averse to uncertainty. We characterize the multiple priors with a confidence interval around the estimated value of expected returns and we model aversion to uncertainty via a minimization over the set of priors. The multi-prior model has several attractive features: One, just like the Bayesian model, it is firmly grounded in decision theory. Two, it is flexible enough to allow for different degrees of uncertainty about expected returns for different subsets of assets, and also about the underlying asset-pricing model generating returns. Three, for several formulations of the multi-prior model we obtain closed-form expressions for the optimal portfolio, and in one special case we prove that the portfolio from the multi-prior model is equivalent to a ?shrinkage? portfolio based on the mean-variance and minimum-variance portfolios, which allows for a transparent comparison with Bayesian portfolios. Finally, we illustrate how to implement the multi-prior model for a fund manager allocating wealth across eight international equity indices; our empirical analysis suggests that allowing for parameter and model uncertainty reduces the fluctuation of portfolio weights over time and improves the out-of sample performance relative to the mean-variance and Bayesian models. |
| 主题 | Financial Economics
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| 关键词 | Portfolio choice
Asset allocation
Estimation error
Uncertainty
Ambiguity
Robustness
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| URL | https://cepr.org/publications/dp5134
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| 来源智库 | Centre for Economic Policy Research (United Kingdom)
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| 资源类型 | 智库出版物
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| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/534022
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推荐引用方式
GB/T 7714 |
Mika Widgren,Heikki Kauppi. DP5134 Voting Rules and Budget Allocation in an Enlarged EU. 2005.
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