Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 25, 2013 erstellt
Description:
We compare the beta model (a.k.a. covariance model) and the characteristics model in terms of their ability to reduce portfolio risk. When global-minimum-variance portfolios (GMVPs) are constructed out of the 500 largest US stocks for the 30-year period between 1981 and 2011, the beta-model-based GMVPs achieve lower volatility than the characteristics-model-based GMVPs. The advantage of the beta model over the characteristics model is not diminished when the beta-characteristics correlation and the beta prices-characteristics prices correlations are varied, and also when the specifications of the characteristics model are modified. The beta model also dominates the characteristics-matched benchmark model; the three-variable and four-variable versions of the beta model dominate the industry-matched benchmark model as well