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The Cross-Section of Positively Weighted Portfolios

Niedermayer, Daniel and Zimmermann, Heinz. (2007) The Cross-Section of Positively Weighted Portfolios. WWZ Discussion Papers, 2007 (15).

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Official URL: https://edoc.unibas.ch/61237/

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Abstract

This paper examines properties of mean-variance inefficient proxies NEWLINE with respect to producing a linear relation between expected returns NEWLINE and betas. The numerical results of a Monte Carlo simulation show NEWLINE that in the CAPM slightly inefficient, positively weighted proxies cause NEWLINE an almost perfect linear expected return - beta relation. Moreover, we NEWLINE show that a strong linearity among a predefined subset of assets exists. NEWLINE These implications are important for the interpretation of empirical NEWLINE tests as well as for asset pricing and for the improvement of proxies’ NEWLINE benchmark properties. In contrast to current literature the results NEWLINE suggest that the CAPM’s pricing error is small when slightly inefficient, NEWLINE positively weighted proxies are used.
Faculties and Departments:06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften > Professuren Wirtschaftswissenschaften > Finanzmarkttheorie (Zimmermann)
12 Special Collections > WWZ Publications > WWZ Discussion Papers and Working Papers
UniBasel Contributors:Zimmermann, Heinz and Niedermayer, Daniel
Item Type:Working Paper
Publisher:WWZ, University of Basel
Number of Pages:31
Note:Publication type according to Uni Basel Research Database: Discussion paper / Internet publication
Language:English
Identification Number:
  • handle: RePEc:bsl:wpaper:2007/15
Last Modified:09 Mar 2018 10:53
Deposited On:07 Mar 2018 11:16

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